STATEMENT OF ACCOUNTS - Milton Keynes

STATEMENT OF ACCOUNTS

2011/12

For the year ended 31st March 2012

Contents

Page No

1 Explanatory Foreword

13 Statement of Auditors Opinion

16 Statement of Responsibilities

17 Accounting Policies

Core Financial Statements

42 Movement in Reserves Statement

44 Comprehensive Income and Expenditure Statement

45 Balance Sheet

46 Cash Flow Statement

47 Notes to the Accounts (Index on following page)

Supplementary Financial Statements

142 Housing Revenue Account

152 Collection Fund

155 Glossary

Contents

Index of Notes to the Financial Statements Page No

Note No

47 1 2010/11 Comparator Restatements

48 2 Accounting Standards that have been Issued but not yet Adopted

48 3 Assumptions about the future, other major sources of estimation uncertainty and critical judgements in applying Accounting Policies.

52 4 Material Items of Income and Expense 52 5 Material Events after the Balance Sheet Date

54 6 Adjustments between Accounting Basis and Funding Basis under Regulation

61 7 Transfers to/from Earmarked Reserves 68 8 Exceptional Items 68 9 Trading Operations 70 10 Acquired and Discontinued Operations 70 11 Agency Services 70 12 Members Allowances 71 13 External Audit Costs 72 14 Road Charging Schemes under the Transport Act 2000 73 15 Pooled Budgets 76 16 Officers Remuneration 78 17 Dedicated Schools Grants 79 18 Grant Income 81 19 Landfill Allowance Trading Scheme 81 20 Property, Plant and Equipment 84 ~ Depreciation 84 ~ Capital Commitments 85 ~ Valuation of Non-Current Assets 87 ~ Re-Valuation of Non-Current Assets 87 ~ Foundation School Asset Values 87 ~ Effects of Changes in Estimates 88 ~ Impairment 89 ~ Material Impairment Losses 90 21 Heritage Assets 94 22 Investment Properties 96 23 Capital Expenditure and Capital Financing

Contents

96 24 Intangible Assets 98 25 Current Assets Held for Sale 98 26 Debtors 99 27 Work in Progress and Inventories 100 28 Creditors 100 29 Borrowing Repayable 101 30 Provisions 105 31 Reserves 105 ~ Capital Adjustment Account 107 ~ Revaluation Reserve 107 ~ Financial Instrument Adjustment Account 108 ~ Pension Reserve 109 ~ Collection Fund Adjustment Account 109 ~ Deferred Capital Receipts Reserve 110 ~ Accumulated Absence Account 110 32 Cash and Cash Equivalents 111 33 Net Cash Flow from Operating Activities 112 34 Amounts Reported for Resource Allocation Decisions 118 35 Financial Instruments 125 36 Leases 127 37 Long Term Contracts 129 38 Related Party Transactions 135 39 Group Accounts 135 40 Trust Funds 136 41 Contingent Gains and Losses 137 42 Retirement Benefits 141 43 Pension Schemes Accounted for as Defined Contribution Schemes

Explanatory Foreword

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1. INTRODUCTION

The financial performance for 2011/12 for the activities undertaken by the council is set out in the Financial Statements as reported in the Statement of Accounts. The Statement of Accounts contains the following:

a. Accounting Policies Details the legislation and principles against which the Statement of Accounts has been prepared;

b. Financial Statements

The Movement in Reserves Statement, incorporating the movement in year

on all the different reserves held by the council;

The council’s Comprehensive Income and Expenditure Statement which summarises resources which have been applied and generated in providing services and managing the council during the last year;

The Balance Sheet which sets out the assets and liabilities recognised by the council as at 31st March 2012, and;

The Cash Flow Statement, which summarises the changes in cash and cash equivalents of the council during the reporting period.

c. Notes to the Financial Statements

The notes to support the financial statements have three main purposes: To present information about the basis of preparation of the financial

statements and the specific accounting policies used;

To disclose the information required by the International Financial Reporting Standards Code of Practice that is not presented elsewhere in the financial statements, and;

To provide information that is not presented elsewhere in the financial statements, but is relevant to the understanding of them.

d. Housing Revenue Account

The Housing Revenue Account Income and Expenditure Statement shows the economic costs in the year of providing housing services in accordance with generally accepted accounting practices rather than the amount to be funded from rents and government grants;

e. Collection Fund

The Collection Fund Statement shows the transactions of the billing authority in relation to the collection from tax payers and distribution to local authorities and the Government of Council Tax and Non-Domestic Rates.


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2. SERVICE EXPENDITURE

The service expenditure comprises the day-to-day service running expenses and general income of the council and includes expenses such as salaries, heating, lighting, rent, rates, stationery and depreciation, plus income relating to the services provided. For 2011/12 the council developed its budget options, within the resources available, by reference to its Corporate Plan and strategic objectives. It also drew on information from formal budget consultations with the public and other interested parties. The council approved a net budget of £196,209,000 for 2011/12 on 22nd February 2011, and chose to freeze its Council Tax. a. General Fund Revenue Outturn The General Fund outturn is a (£0.282m) underspend and a contribution of (£1.500m) to the General Fund as budgeted, which has been achieved against a backdrop of reductions in Government funding in year as well as pressures identified during the year. This shows the council has addressed the savings requirement and delivered a small underspend, with some opportunity to create reserves for specific future financial issues. This creates a solid basis for the delivery of the 2012/13 budget and the confirmed challenge of addressing the future years budget pressures. The overall impact of this outturn position produces a closing position of £8.796m on General Fund Balance as at 31st March 2012. The Housing Revenue Account is reporting an outturn in year of (£1.421m). The overall position for the year, including the balance brought forward from 2010/11, is an underspend of (£0.123m), which results in a reserve balance at the end of March 2012 of £5.511m. The outturn position for the Dedicated Schools Grant is an underspend of (£2.302m). The Capital outturn is (£6.824m) against the latest spend approval, £6.854m is due to delays in projects, resources and project delivery will be rephased into 2012/13, leaving a small overspend of £0.030m on the capital programme. The table overleaf details the over and underspends by Service Group:


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RevisedBudget£'000 £'000 £'000 %

Resources: Finance and Human Resources 8,707 8,406 (301) (3.5%)Resources: Public Access 95 75 (20) (21.1%)Adult Social Care and Health 57,299 56,489 (810) (1.4%)Housing and Community 2,355 3,133 778 33.0%Regulatory Unit 3,440 3,384 (56) (1.6%)Community Facilities Unit 12,812 12,661 (151) (1.2%)Integrated Support and Social Care 30,741 30,608 (133) (0.4%)Education, Effectiveness and Participation 35,520 34,529 (991) (2.8%)Planning, Economy and Development 2,100 2,434 334 15.9%Highways and Transportation 19,544 19,575 31 0.2%Neighbourhood Services 27,887 28,200 313 1.1%Organisational Transformation Programme 472 520 48 10.2%Corporate Core 4,139 4,057 (82) (2.0%)Net Operating Expenditure 205,111 204,071 (1,040)

Corporate ItemsLevies 439 439 0 0.0%Debt Financing and Interest Charges 22,501 21,539 (962) (4.3%)Sustainability Items 779 779 0 0.0%Corporate Savings & One Off Pressures 1,204 2,924 1,720 142.9%Asset Rental (33,825) (33,825) 0 0.0%Projected Outturn Position 196,209 195,927 (282)

ResourcesFormula Grant (88,491) (88,491) 0 0.0%Early Intervention Grant (10,172) (10,172) 0 0.0%Council Tax (Including Freeze Grant) (94,807) (94,807) 0 0.0%Reserves (2,739) (2,739) 0 0.0%Total Resources Available (196,209) (196,209) 0

(Addition)/Reduction in General Fund 0 (282) (282)

General Fund Balance 1st April 2011 (7,014)General Fund (Under)/Overspend 2011/12 (282)Budgeted Contribution to General Fund Balance (1,500)

General Fund Balance 31st March 2012 (8,796)

Outturn (Under)\Overspends

Significant variations for each Service Group are detailed in the paragraphs that follow. Resources - Finance and Human Resources The significant variations in Resources - Finance and Human Resources are increased income from Housing Benefit overpayment debts of (£306,000), additional recovery of council tax benefit overpayments of (£345,000) and improved recovery of Housing Benefit payments of (£344,000). These savings were offset by £235,000 to provide for funding for future potential liabilities arising from central government changes to both Council Tax benefits and Housing Benefit


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Reform and a contribution of £300,000 to the Insurance Reserve due to an increase in the expected level of claims. An unachievable Procurement savings target of £283,000 was partially offset by Procurement restructure savings of (£114,000). Resources - Public Access Facilities and Administration Buildings were unable to achieve hospitality catering and room hire income £144,000 but incurred lower utility costs (£84,000) than budgeted. Further savings were achieved in costs for office rationalisation (£55,000), lower cleaning and catering costs (£57,000), repairs & maintenance costs (£63,000), and additional rent income and savings (£60,000). Property shows an underspend of (£159,000) due to the release of a Property creditor which is offset by a contribution to the office accommodation Reserve £200,000. Adult Social Care and Health Joint Commissioning and Contracts budgets under spent by (£370,000) including pressures on the joint equipment budget with the Primary Care Trust of £120,000 which have been offset by grant savings and the maintenance of vacancies (£222,000). There is also an under spend within Adult Social Care Training of (£268,000). Adult Social Care is under spent by (£475,000). Overspends within Physical Disability external homecare were more than offset by reductions in Learning Disability transition placements and efficiency savings in the Mental Health Pooled Budget. There were also favourable variances in Community Alarms and Sheltered Housing due to staffing vacancies within sheltered schemes and equipment savings within the Alarm Service. Additional savings were made across Other Adult Services including Supported Employment, Emergency Social Work, Alcohol Abuse Placements and Delayed Discharges. Housing and Community The variance against Revised Budget includes the creation of reserves totalling £639,000 including £200,000 for the compulsory purchase of two properties at Peartree Bridge, £200,000 for legal fees linked to compulsory purchase and a dispute over Calverton Travellers Site and £100,000 for Bed and Breakfast costs arising from homelessness. There was also a loss of income and future abortive capital costs related to travellers’ sites of £154,000. Regulatory Unit The Regulatory Unit received additional income of (£148,000) in Licensing and Cemeteries and Crematoria, which offsets reduced income in Building Control and Sustainability. Additional legal costs for the Casino of £137,000 combined with legal and professional fees in Licensing of £90,000 and tribunal costs £60,000 are partially offset by savings in utility costs (£246,000).


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Community Facilities Unit Savings within Leisure and Community in respect of the Leisure Partnership Contract were (£133,000), and the Library Service achieved savings of (£143,000). These are offset by additional costs in respect of Woughton Leisure Centre and Woughton on the Green Sports Ground of £180,000. Integrated Support and Social Care Staff identified in the Special Education Needs Disability and Inclusion Service (SENDIS) team who were budgeted to be charged to General Fund have been charged to Dedicated Schools Grant creating an underspend of (£213,000). £113,000 contribution has been made to Earmarked Reserves to offset the anticipated shortfall in Youth Services income in 2012/13, while restructuring of the service takes place. There were pressures within Children’s Social Care, because of the increasing number of children in care, and in-house fostering placements resulting in an overspend of £326,000. There were overspends of £98,000 in Special Guardianship Orders and £111,000 supported accommodation for 16/17 year olds. These pressures were offset by increased use of better value placements to reduce expenditure on external fostering and residential placements (£329,000). Family Support staffing underspent by (£224,000) due to reduced use of agency staff. A Demand reserve of £420,000 was created at the start of the year for increases in numbers of children in care; however, it was not necessary to draw down on this reserve and £200,000 was added to it in year to mitigate against the risks of an increase in provision. Education, Effectiveness and Participation Key variations include project management costs for Day Nurseries and adjustments to senior posts within Universal Services £194,000 and an overspend of £107,000 in Day Nurseries due to reduced income and the use of agency staff. In addition, a contribution to reserves of £400,000 has been made to fund redundancy, reorganisation and running costs for the Organisational Transformation Programme. These costs are offset by underspends across Children’s Centres (£103,000), lower use of the Improvement Fund than anticipated (£132,000), an underspend on Home to College Transport following the introduction of eligibility changes (£102,000), an underspend on Short Breaks (£344,000) and a saving on recommissioned services of (£307,000). In addition, increased buy back of the Music Service (£88,000) and Children and Adolescent Mental Health Services (CAMHS) staffing vacancies of (£65,000) combined with lower take up of Early Years Provision projects and workforce training (£126,000) further improved the service group position.


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Planning, Economy and Development Urban Design was unable to achieve £56,000 of the income target. This was income previously chargeable to the Homes and Community Agency (HCA), but the transfer of the HCA development control function to the council meant this could no longer be achieved. Development Management had additional legal costs of £56,000 from appeals and Housing in Multiple Occupation (HIMO) appeal costs awarded and an £88,000 shortfall in fee income. In Spatial Planning a number of studies and surveys that had been planned to take place during the year could not be carried out due to delays in the Core Strategy, saving (£76,000). Restructuring of services resulted in pension strain and redundancy costs of £144,000 in Economic Development and £52,000 in Spatial Planning. This was partially offset by (£87,000) savings realised from the Planning Restructure. Highways and Transportation Energy costs in street lighting were £395,000 over the budget due to the delays in savings implementation together with the energy increase in October. Fees from charging capital projects were overachieved by (£165,000), although abortive costs from the Station Square capital project of £69,000 had to be recharged to revenue. A provision of £143,000 was made in relation to the potential shortfall on the Secklow Gate insurance claim and £126,000 was spent on principal bridge inspections. Concessionary fare reimbursement costs were £276,000 greater than budget due to increased ridership levels but there were savings on bus subsidies (£412,000) as a result of increased revenues; pursuing cross boundary income due from other authorities and savings on the contracts when they were tendered early in the year. Community transport costs were (£67,000) less than budget and additional highways adoption income of (£260,000) was achieved. Neighbourhood Services Savings of £150,000 were planned in the budget for the introduction of a four day week in waste collection. This could not be achieved due to operational restrictions at depot, landfill and other sites. Savings of £100,000 were also planned from staffing on the Joint Waste Project which has since ceased. These pressures are offset by Landfill tonnage savings of (£645,000), a reduction in Hazardous Waste tonnage (£93,000), a reduction in costs from the Carbon Reduction Commitment contract resultant from the new ways of working (£257,000) and additional income from the Materials Recycling Facility profit share of (£110,000). A decrease in the amount of fleet hire of £131,000 meant the savings anticipated for increased trading account charges in Fleet were not achieved. In addition a £200,000 provision was made for potential liabilities arising from ongoing fleet investigations. Building services had £108,000 more pay costs than budgeted because of a change from


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temporary to permanent staff during the year. These costs were not fully recovered through income. In Landscape, fleet costs were £242,000 more than budgeted and a reduction in salaries of (£295,000) from reduced Agency and Overtime usage was offset by contractor/professional services of £411,000. Adoptions income has fallen significantly from previous years because of no residual land transfers from the HCA, income was £113,000 less than budget and Environmental Services Development under achieved its salary recovery by £120,000. Organisational Transformation Programme Additional staffing costs required for the delivery of the Organisation Transformation Programme were partially funded from savings in supplies and services. Corporate Core There were a number of underspends in Democratic Services including (£119,000) on Member Services for salary cost savings, reduced transport and catering costs and savings on supplies and services. In Local Elections there were savings of (£46,000) on staff costs due to the ability to charge costs against the Referendum, £100,000 was contributed to the Events Reserve and the Portfolio Office saved (£61,000) due to maternity leave and staff vacancies. Variations between latest outturns and latest approved budgets are monitored on a monthly basis and are reported to Members throughout the year. Further information on the overall financial performance of the council in 2011/12 is disclosed in the Comprehensive Income and Expenditure Statement and the notes to the Financial Statements. Corporate Items An opportunity to purchase Microsoft Office upgrades earlier than anticipated resulted in a cost of £550,000 in 2011/12, releasing savings for future financial years and avoiding price increases. There was also an additional contribution of £200,000 to the Redundancy and Reorganisation Reserve. Under accounting regulations the Council must provide for potential costs as at 31st March. Debt Financing The movement in debt financing was to provide for potential future treasury management cash flow costs linked to the ongoing discussions with the Homes and Communities Agency.


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b. Housing Revenue Account Outturn The outturn position for the HRA shows an in year underspend of (£1.421m) at 31st March 2012. Significant variations include (£798,000) net savings in repairs expenditure which offsets £256,000 reduction in rent due to longer re-let periods as a result of changes in the asbestos management process leading to a higher number of empty properties undergoing works. Other notable savings include (£321,000) resulting from vacancies and restructuring, (£305,000) from release of uncommitted special services works budgets (block improvements, landscaping and cleaning), (£106,000) from capitalisation of building services (including WBT share), (£290,000) savings in utility costs from the milder winter, (£189,000) fall in debt charges and (£286,000) from anticipated recovery of leasehold service charge costs. A deficit of £660,000 was recognised in the Leasehold Major Works Recharge account as less work was carried out for leaseholders and on communal areas than had been anticipated in the budget. Review of Leasehold bad debt reserves and budgets highlighted an excess of (£130,000) above current provision requirements and was released accordingly to part fund the leasehold major works recharge gap. Services required for the Working Better Together programme incurred costs of £500,000. However, this resulted in a lower contribution to the Revenue Contributions to Capital Outlay Account, achieving a saving of (£190,000). In 2011/12 an earmarked reserve of £310,000 was created within the HRA to fund the HRA element of demolition costs relating to three units at Waterside due to take place in 2012/13. The level of HRA Reserve at the end of 2010/11 was £1,298,000 less than budgeted due to necessary additional contributions made towards MKC regeneration (CESP Community Energy Saving Programme) and major works capital projects. Therefore, overall, the underspend at 31st March 2012 was (£123,000). This results in the level of the reserve carry forward being (£5,511,000) compared to a budget of (£5,388,000) at 31st March 2012. Further information on the overall financial performance of the Housing Revenue Account in 2011/12 is disclosed in the notes to the Supplementary Financial Statements. c. Income from Grants, Local Tax Payers and Other Sources The net budget requirement was financed from four main sources:

• Redistributed Non-Domestic Rates (£67.596m) NNDR is the amount raised from businesses collected locally but re-distributed

nationally;


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• Revenue Support Grant (RSG) (£20.894m) RSG is one of the two main non-specific grants from central government;

• Early Intervention Grant (EIG) (£10.219m)

EIG is the other main non-specific grant from Central Government;

• Council Tax (£98.599m) This is the means of raising money locally, based upon the value of domestic property and is adjusted for the previous year’s surplus or deficit on collection.

In addition, some services receive specific grants, which are included in their separate budgets. There are conditions attached to many of these grants, which set out how, when and on what service or activity the grant may be spent. Since 1st April 2007 Schools services have been funded through the Dedicated Schools Grant (DSG). For 2011/12 the council received £158.6m in DSG funding. This funding was previously provided through the RSG and NNDR. A list of the grants the council received in 2011/12 can be found at note 18 to the Financial Statements. 3. PENSION LIABILITY

The council is a member of the Local Government Pension Scheme administered by Buckinghamshire County Council. The council’s financial statements in accordance with the proper accounting practice show a pension liability at 31st March 2012 of (£263.933m), which is an increase of (£121.768m) since 2010/11. In practice, statutory arrangements for funding the deficit mean that the financial position of the authority remains healthy. The deficit will be funded through reassessment of employer’s contributions as a result of the three-yearly fund valuations by the actuary. This is done in accordance with the appropriate International Financial Reporting Standard (IAS) 19. Full details of the Local Government Pension Scheme can be found in note 42 to the Financial Statements.


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4. MATERIAL OR UNUSUAL CHARGES OR CREDITS TO THE ACCOUNTS, ASSETS ACQUIRED OR LIABILITIES INCURRED

The following transactions are considered to be material or unusual charges or credits within the 2011/12 Statement of Accounts:

a) The council’s pension liability has increased by (£121.768m). Further details can

be found in the Local Government Pension Scheme note 42 to the Financial Statements;

b) Major non-current asset disposals during the year include the transfer of the

Tickford Park and Green Park Schools to Foundation status along with a parcel of land which should have been transferred when Walton High moved to Foundation Status. These transfers totalled £7.207m. Details of major non-current asset disposals can be found in note 4 to the Financial Statements;

c) Milton Keynes Council has disclosed one item as exceptional in the Comprehensive

Income and Expenditure Accounts for the HRA Self Financing Scheme due to the degree of prominence required to provide a fair view of the accounts. Details of this Exceptional item can be found in note 8 to the Financial Statements.

5. SIGNIFICANT CHANGE IN ACCOUNTING POLICY

The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 introduced a change to the treatment in accounting for Heritage assets held by the Council. Heritage Assets are required to be recognised as a separate class of assets for the first time in the 2011/12 financial statements. Previously, heritage assets were either recognised as community assets (at cost) in the Property, Plant and Equipment classification in the Balance Sheet or were not recognised in the Balance Sheet as it was not possible to obtain cost information on the assets. Full details of the Heritage Assets held by the council can be found in the Notes to the Financial Statements (Property, Plant and Equipment note 20). 6. BORROWING FACILITIES

During 2011/12 ten new Public Works Loan Board loans totalling (£170.360m) were taken out to fund the HRA Self-Financing settlement payment in order to exit the Housing Subsidy system (classified as capital expenditure). Furthermore, one existing long term loan (£15.0m) was repaid upon maturity to the Public Works Loan Board during the year.


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At the end of the financial year the council had outstanding borrowing in respect of the funding of capital projects of (£457.387m) including accrued interest. Further details of the composition of this sum can be found in the note 29 to the Financial Statements. It was not necessary during the year for the council to borrow temporary funds for cash flow purposes. Consequently, there were no temporary loans outstanding at 31st March 2012. At the 31st March 2012, the council had £101.880m invested with various financial institutions, of this amount £2.233m has been classified as cash equivalents as per the Accounting Policy note 6. 7. INTERNAL AND EXTERNAL SOURCES OF FINANCE TO FUND CAPITAL

EXPENDITURE PLANS AND FINANCIAL COMMITMENTS

The council’s total capital expenditure for 2011/12 including amounts accrued for works completed but not paid for at 31st March 2012 was £35,056,000 (£62,718,000 in 2010/11). The sources of finance to fund this expenditure included Government grants and contributions of £27,210,000 (£37,684,000 in 2010/11) which includes £8,092,000 Major Repairs Allowance, supported borrowing of £4,242,000 (£14,956,000 in 2010/11). The balance of £3,604,000 (£10,079,000 in 2010/11) came from capital receipts, revenue contributions prudential borrowing and finance leases. Full details of capital expenditure and financing can be found in note 23 to the Financial Statements. Capital commitments total £10,500,000 and include a new swimming pool and facilities at Wolverton swimming pool and a new Community Pavilion in Broughton. Full details of the council’s capital commitments can be found in note 20 to the Financial Statements. 8. SIGNIFICANT PROVISIONS, CONTINGENCIES AND WRITE-OFFS

The Council has three significant provisions held on the Balance Sheet as at 31st March 2012: • Heating and Utilities Provision – This has been set aside to cover the cost of potential

refunds to sheltered area tenants and leaseholders in respect of over recovered utility costs;

• Overpaid Benefit Provision – The council has created this provision to meet the cost of

any overpaid housing benefits currently recovered through a reduction in ongoing benefit payments, which become unrecoverable due to a change in tenant circumstances, and:


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• Secklow Gate Bridge - Following a fire under the bridge during 2010, a provision was created to account for the possibility that the third party insurance company would not pay the full costs incurred for the repair work.

Further details of the provisions can be found in Note 30 to the financial statements. The council discloses a number of contingent gains and losses in note 41 to the financial statements. The most significant disclosure relates to the overage due to the council as and when properties built on the Radcliffe School land are sold. There have been no significant write offs during 2011/12. 9. IMPACT OF CURRENT ECONOMIC CLIMATE

Two key areas affected by the economic downturn are housing asset valuations and a decline in the growth of the Council Tax base. The reduction in Housing Asset Valuations was recognised in an 18.9% deflation adjustment to 2008/09 based upon Housing Price Index data for Milton Keynes. A review of the same data indicates that land values have stabilised and that no further adjustment is necessary for 2011/12. The process for calculating the tax base for forthcoming years has been revised since 2009 to take prudent account of the decline in the level of house-building. In addition, the level of balances held in both the General Fund and Housing Revenue Account are reviewed annually as part of the budget setting process to ensure that they are adequate to meet possible fluctuations in income and expenditure during the forthcoming year. Reserves have been created to mitigate the possible impact of change programmes agreed by the council to meet shortfalls in funding or changes in government funding streams. 10. PROCUREMENT OF SERVICES

The council entered into a long term (twelve year) contract with Hyder Business Services (HBS), now trading as Mouchel Business Services, with effect from 1st January 2004 to provide a wide range of functions across eighteen service streams including Finance, Human Resources, IT, Revenues and Benefits. The council has retained a client/core team for these functions and a team has been created to monitor the overall performance of the contract. Full details of all long term contracts, including further details of the contract with Mouchel, can be found in note 37 to the Financial Statements.

Accounting Policies

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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF MILTON KEYNES COUNCIL Opinion on the Authority financial statements I have audited the financial statements of Milton Keynes Council for the year ended 31 March 2012 under the Audit Commission Act 1998. The financial statements comprise the Movement in Reserves Statement, the Comprehensive Income and Expenditure Statement, the Balance Sheet, the Cash Flow Statement, the Housing Revenue Account Income and Expenditure Statement, the Movement on the Housing Revenue Account Statement and Collection Fund and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12. This report is made solely to the members of Milton Keynes Council in accordance with Part II of the Audit Commission Act 1998 and for no other purpose, as set out in paragraph 48 of the Statement of Responsibilities of Auditors and Audited Bodies published by the Audit Commission in March 2010. Respective responsibilities of the Chief Finance Officer and auditor As explained more fully in the Statement of Responsibilities, the Chief Finance Officer is responsible for the preparation of the Statement of Accounts, which includes the financial statements, in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom, and for being satisfied that they give a true and fair view. My responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require me to comply with the Auditing Practices Board’s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Authority’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Chief Finance Officer; and the overall presentation of the financial statements. In addition, I read all the financial and non-financial information in the explanatory foreword to identify material inconsistencies with the audited financial statements. If I become aware of any apparent material misstatements or inconsistencies I consider the implications for my report. Opinion on financial statements In my opinion the financial statements: • give a true and fair view of the financial position of Milton Keynes Council as at 31 March 2012 and of its expenditure and income for the year then ended; and • have been prepared properly in accordance with the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom 2011/12.

Accounting Policies

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Opinion on other matters In my opinion, the information given in the explanatory foreword for the financial year for which the financial statements are prepared is consistent with the financial statements. Matters on which I report by exception I report to you if: • in my opinion the annual governance statement does not reflect compliance with ‘Delivering Good Governance in Local Government: a Framework’ published by CIPFA/SOLACE in June 2007; • I issue a report in the public interest under section 8 of the Audit Commission Act 1998; • I designate under section 11 of the Audit Commission Act 1998 any recommendation as one that requires the Authority to consider it at a public meeting and to decide what action to take in response; or • I exercise any other special powers of the auditor under the Audit Commission Act 1998. I have nothing to report in these respects. Conclusion on Authority’s arrangements for securing economy, efficiency and effectiveness in the use of resources Respective responsibilities of the Authority and the auditor The Authority is responsible for putting in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources, to ensure proper stewardship and governance, and to review regularly the adequacy and effectiveness of these arrangements. I am required under Section 5 of the Audit Commission Act 1998 to satisfy myself that the Authority has made proper arrangements for securing economy, efficiency and effectiveness in its use of resources. The Code of Audit Practice issued by the Audit Commission requires me to report to you my conclusion relating to proper arrangements, having regard to relevant criteria specified by the Audit Commission. I report if significant matters have come to my attention which prevent me from concluding that the Authority has put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources. I am not required to consider, nor have I considered, whether all aspects of the Authority’s arrangements for securing economy, efficiency and effectiveness in its use of resources are operating effectively. Scope of the review of arrangements for securing economy, efficiency and effectiveness in the use of resources I have undertaken my audit in accordance with the Code of Audit Practice, having regard to the guidance on the specified criteria, published by the Audit Commission in October 2011, as to whether the Authority has proper arrangements for: • securing financial resilience; and • challenging how it secures economy, efficiency and effectiveness. The Audit Commission has determined these two criteria as those necessary for me to consider under the Code of Audit Practice in satisfying myself whether the Authority put in place proper arrangements for securing economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2012.

Accounting Policies

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I planned my work in accordance with the Code of Audit Practice. Based on my risk assessment, I undertook such work as I considered necessary to form a view on whether, in all significant respects, the Authority had put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources. Conclusion On the basis of my work, having regard to the guidance on the specified criteria published by the Audit Commission in October 2011, I am satisfied that, in all significant respects, Milton Keynes Council put in place proper arrangements to secure economy, efficiency and effectiveness in its use of resources for the year ended 31 March 2012. Certificate I certify that I have completed the audit of the accounts of Milton Keynes Council in accordance with the requirements of the Audit Commission Act 1988 and the Code of Audit Practice issued by the Audit Commission. Mick West District Auditor Audit Commission Unit 5, Isis Business Centre Horspath Road Cowley, Oxford OX4 2RD 26 September 2012

Accounting Policies

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1. THE COUNCIL’S RESPONSIBILITIES

The council is required: a) to make arrangements for the proper administration of its financial affairs and to

secure that one of its officers has the responsibility for the administration of those affairs. In this council, that officer is the Chief Finance Officer;

b) to manage its affairs to secure economic, efficient and effective use of resources and safeguard its assets;

c) to approve a statement of accounts.

On behalf of the council:

2. THE RESPONSIBILITIES OF THE CHIEF FINANCE OFFICER

The Chief Finance Officer is responsible for the preparation of the council’s Statement of Accounts in accordance with proper practices as set out in the CIPFA/LASAAC Code of Practice on Local Authority Accounting in the United Kingdom (“the Code”). In preparing this Statement of Accounts, the Chief Finance Officer has: a) selected suitable accounting policies and then applied them consistently; b) made judgements and estimates that were reasonable and prudent; c) complied with the Local Authority Code.

The Chief Finance Officer has also: a) kept proper accounting records which are up to date; b) taken reasonable steps for the prevention and detection of fraud and other

irregularities. The Statement of Accounts provides a true and fair view of the council’s financial position of the authority at the reporting date, and of its income and expenditure for the year ended 31st March 2012.

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1. GENERAL PRINCIPLES

The Statement of Accounts summarises the council’s transactions for the 2011/12 financial year and its position at the year-end of 31st March 2012. The authority is required to prepare an annual Statement of Accounts by the Accounts and Audit Regulations 2011 which those regulations require to be prepared in accordance with proper accounting practices. These practices primarily comprise the Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 and the Service Reporting Code of Practice (SeRCOP) 2011/12 supported by International Financial Reporting Standards (IFRS) and statutory guidance issued under section 12 of the 2011 Act. The accounting policies have been applied consistently in dealing with items considered material to present a true and fair view of the financial position and transactions of the council. 2. ACCRUALS OF INCOME AND EXPENDITURE

Activity is accounted for in the year that it takes place, not simply when cash payments are made or received. In particular:

• Revenue from the sale of goods is recognised when the authority transfers the

significant risks and rewards of ownership to the purchaser and it is probable that economic benefits or service potential associated with the transaction will flow to the authority;

• Revenue from the provision of services is recognised when the authority can measure reliably the percentage of completion of the transaction and it is probable that economic benefits or service potential associated with the transaction will flow to the authority;

• Supplies are recorded as expenditure when they are consumed – where there is a gap between the date supplies are received and their consumption; they are carried as inventories on the Balance Sheet;

• Works are charged as expenditure when they are completed, before which they are carried as works in progress on the Balance Sheet;

• Interest payable on borrowings and receivable on investments is accounted for on the basis of the effective interest rate for the relevant financial instrument rather than the cash flows fixed or determined by the contract;

• Where income and expenditure have been recognised but cash has not been received or paid, a debtor or creditor for the relevant amount is recorded in the Balance Sheet. Where it is doubtful that debts will be settled, the balance of debtors is written down and a charge made to revenue for the income that might not be collected;

• Payment of wages to weekly paid employees is included in the accounts on the basis of a 52-week year, except in the case of Homecare staff where wages have been accrued. This accounting treatment, other than in respect of Homecare staff, is not in accordance with the Code of Practice, although any difference is not considered material. Similarly, issues from the council’s stores and all other internal recharging systems have been treated in the same way;

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• Annual leave and flexi-time that has not been taken at 1st March is accrued and full details can be found in Accounting Policy note 9 – Employee Benefits.

3. ACQUIRED AND DISCONTINUED OPERATIONS

IFRS5 defines a discontinued operation as a component of an entity that either has been disposed of or is classified as held for sale, and: • represents either a separate major line of business or a geographical area of

operations, and; • is part of a single co-ordinated plan to dispose of a separate major line of business or

geographical area of operations, or; • is a subsidiary acquired exclusively with a view to resale and the disposal involves loss

of control. The surplus or deficit on discontinuing the operation is presented as a single amount on the face of the Comprehensive Income and Expenditure Statement where applicable. Detailed disclosure of revenue, expenses, surplus or deficit and related items is presented as a note to the Financial Statements where applicable, however, there were no operations discontinued or acquired during 2011/12 and therefore no disclosures are required.

4. BACK PAY ARISING FROM UNEQUAL PAY CLAIMS

The council has no current claims in respect of Equal Pay legislations, and therefore no provision has been made. However, the issue is disclosed as a contingent liability in Note 41 to the Financial Statements. 5. CAPITAL RECEIPTS

Receipts from the sale of assets are recorded in the accounts in accordance with normal accounting practice. Under regulations introduced from April 2004 the council is required to pay a percentage of receipts from the sale of housing assets to the Department for Communities and Local Government. This percentage is 75% for dwellings and 50% for any other interest in housing land.

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6. CASH AND CASH EQUIVALENTS

Cash is represented by cash in hand and deposits with any financial institution repayable without penalty on notice of not more than 24 hours. Cash equivalents are investments held for cash flow purposes that mature in three months or less from the date of acquisition and that are readily convertible to known amounts of cash with insignificant risk of change in value. In the Cash Flow Statement, cash and cash equivalents are shown net of bank overdrafts that are repayable on demand and that form an integral part of the council’s cash management.

7. CHARGES TO REVENUE FOR THE USE OF NON-CURRENT ASSETS

Service revenue accounts and support services are debited with the following amounts for all fixed assets used in the provision of their services to record the real cost of holding those assets during the year: • Depreciation attributable to the assets used by the relevant service; • Impairment losses attributable to the clear consumption of economic benefits on

tangible fixed assets used by the service and other losses where there are no accumulated gains in the Revaluation Reserve against which they can be written off;

• Amortisation of intangible fixed assets attributable to the service.

The charge made to the Housing Revenue Account is calculated in accordance with the Item 8 Credit and Item 8 Debit (General) Determination 2011/12. In addition, in March 2012 the council completed the necessary transaction under the move to HRA Self Financing in 2012/13. This transaction was treated in accordance with guidance issued by CIPFA in LAAP Bulletin 92. External interest payable is charged to the Financing and Investment Income and Expenditure section of the Comprehensive Income and Expenditure Statement. The council is not required to raise Council Tax to cover depreciation, impairment losses or amortisations; however, it is required to make an annual provision from revenue to contribute towards the reduction in its overall borrowing requirement calculated in accordance with statutory guidance. Depreciation, impairment and amortisations are therefore replaced by a revenue provision in the Movement in Reserves Statement so there is no impact on the level of Council Tax.

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8. DONATED ASSETS

Donated assets transferred for nil consideration are recognised immediately at fair value as an asset on the Balance Sheet, unless any conditions of the transfer have not been met and the asset is credited to a Donated Assets Account. 9. EMPLOYEE BENEFITS

Short Term Employee Benefits Payable during Employment

Salaries, wages and employee related payments are recognised in the period in which the service is received from employees. The cost of annual leave entitlement earned but not taken by employees at the end of the period is recognised in the Financial Statements to the extent that employees are permitted to carry forward leave into the following period. Untaken leave is accrued on the basis of actual leave untaken at 31st March 2012 for non-school staff and a calculation of the accrued benefit for schools staff based on the number of days in each term. Employees are also entitled to flexi-time and any accrued hours at 31st March have been reflected in the accounts on the basis of actual hours accumulated by each employee.

Termination Benefits

Termination benefits are amounts payable as a result of a decision by the authority to terminate an officer’s employment before the normal retirement date or an officer’s decision to accept voluntary redundancy. Benefits are charged on an accruals basis to the Comprehensive Income and Expenditure Statement when the authority is demonstrably committed to the termination of the employment of an officer or group of officers or making an offer to encourage voluntary redundancy.

Post Employment Benefits - Local Government Pension Scheme

Employees of the council are entitled to become members of one of two separate pension schemes according to the terms of their employment: • The Teachers’ Pension Scheme, administered by Capita Teachers’ Pensions on behalf

of the Department for Children, Schools and Families (DCSF); • The Local Government Pension Scheme, administered by Buckinghamshire County

Council. Both schemes provide defined benefits to members (retirement lump sums and pensions), earned as employees worked for the council. However, the arrangements for the teachers’ scheme mean that liabilities for these benefits cannot be identified to the council. The teachers’ scheme is therefore accounted for as if it were a defined contributions scheme; no liability for future payments of benefits is recognised in the Balance Sheet and the Children and Education Services revenue account in the Comprehensive Income and

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Expenditure Statement is charged with the employer’s contributions payable to teachers’ pensions in the year. The Local Government Scheme is accounted for as a defined benefits scheme. The liabilities of the Buckinghamshire pension scheme attributable to the council are included in the Balance Sheet on an actuarial basis using the projected unit method (i.e. an assessment of the future payments that will be made in relation to retirement benefits earned to date by employees, based on assumptions about mortality rates, employee turnover rates, etc, and projected earnings for current employees).

Liabilities are discounted to their value at current prices, using a discount rate of 1.6% (1.3% real). The discount rate for pension’s liabilities is calculated using the AA Corporate Bond Rate. The assets of the Local Government Pension Fund attributable to the council are included in the Balance Sheet at their fair value:

• Quoted Securities – Current Bid Price; • Unquoted Securities – Professional Estimate; • Unitised Securities – Current Bid Price; • Property – Market Value.

The change in the net pension’s liability is analysed into seven components:

• Current Service Cost – the increase in liabilities as result of years of service earned this

year, allocated in the Comprehensive Income and Expenditure Statement to the revenue accounts of services for which the employees worked;

• Past Service Cost – the increase in liabilities arising from current year decisions whose effect relates to years of service earned in earlier years, charged to the Net Cost of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs;

• Interest Cost – the expected increase in the present value of liabilities during the year as they move one year closer to being paid, charged to Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement;

• Expected Return on Assets – the annual investment return on the fund assets attributable to the council, based on an average of the expected long-term return, credited to Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement;

• Gains/Losses on Settlements and Curtailments – the result of actions to relieve the council of liabilities or events that reduce the expected future service or accrual of benefits of employees, charged to the Cost of Services in the Comprehensive Income and Expenditure Statement as part of Non Distributed Costs;

• Actuarial Gains and Losses – changes in the net pensions liability that arise because events have not coincided with assumptions made at the last actuarial valuation or because the actuary has updated its assumptions, shown as a gain or loss in the Other Comprehensive Income and Expenditure section of the Comprehensive Income and Expenditure Statement;

• Contributions paid to the Buckinghamshire Pension Fund – cash paid as employer’s contributions to the pension fund.

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The accounting treatment for pensions benefits is in accordance with International Financial Reporting Standard (IAS) 19. This is a complex accounting standard, but it is based on a simple principle – that the council has to account for accumulated retirement benefits earned at the Balance Sheet date, even if the actual benefits are paid out over many years into the future. These policies reflect the council’s commitment in the long term to increase contributions to make up any shortfall in attributable net assets in the pension fund.

In relation to retirement benefits, statutory provisions require the General Fund Balance to be charged with the amount payable by the council to the pension fund in year, not the amount calculated according to the relevant accounting standards. This means that there are appropriations to and from the Pensions Reserve to remove the notional debits and credits for retirement benefits and replace them with debits for the cash paid to the pension fund and any amounts payable to the fund but unpaid at the year end. Full disclosures in respect of the Local Government Pension Scheme can be found in note 42 to the Financial Statements.

Discretionary Benefits

The council also has restricted powers to make discretionary awards of retirement benefits in the event of any early retirements. Any liabilities estimated to arise as a result of an award to any member of staff (including teachers) are accrued in the year of the decision to make the award and accounted for using the same policies as are applied to the Local Government Pension Scheme.

10. EVENTS AFTER THE BALANCE SHEET DATE

Events after the Balance Sheet date are defined as events, which could be favourable or unfavourable, that occur between the end of the reporting period and the date that the Financial Statements are authorised for issue. Events can be classified as adjusting or non-adjusting, with definitions as follows: • Adjusting - An event after the reporting period that provides further evidence of

conditions that existed at the end of the reporting period, including an event that indicates that the going concern assumption in relation to the whole or part of the council is not appropriate;

• Non-Adjusting - An event which takes place after the reporting period that is indicative of a condition that arose after the end of the reporting period.

The council discloses details of any such events at Note 5 to the Financial Statements.

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11. EXCEPTIONAL ITEMS AND PRIOR PERIOD ADJUSTMENTS

Exceptional items are included in the cost of the service to which they relate or on the face of the Comprehensive Income and Expenditure Statement if such a degree of prominence is required for a fair view of the accounts. A disclosure note is provided where the authority has any exceptional items in the Accounts. Prior period adjustments that are the result of corrections and adjustments arising from the use of estimates inherent in the accounting process are adjusted in the accounts in the year that they are identified. However, prior period adjustments arising from changes in accounting policies or from the correction of fundamental errors are accounted for by restating the comparative figures for the preceding period in the Statement of Accounts and notes and by adjusting the opening balance of reserves for the cumulative effect. Details of any Prior Period Adjustments are fully explained as a note to the accounts where applicable.

12. FINANCIAL INSTRUMENTS

Financial Liabilities:

Financial liabilities are initially measured at fair value and carried at amortised cost. Annual charges to the Comprehensive Income and Expenditure Statement for interest payable are based on the carrying amount of the liability, multiplied by the effective interest rate for the instrument. For most of the borrowings that the council has, this means that the amount presented in the Balance Sheet is the outstanding principal repayable and any accrued interest and interest charged to the Comprehensive Income and Expenditure Statement is the amount payable for the year in the loan agreement. Gains and losses on the repurchase or early settlement of borrowing are credited and debited to Financing and Investment Income and Expenditure in the Comprehensive Income and Expenditure Statement in the year of repurchase or settlement. Where a repurchase has taken place as part of the restructuring of the loan portfolio that involves the modification or exchange of existing instruments, the premium or discount is respectively deducted from or added to the amortised cost of the new or modified loan, and the write down to the Comprehensive Income and Expenditure Statement is spread over the life of the loan by an adjustment to the effective interest rate. Where premiums and discounts have been charged to the Comprehensive Income and Expenditure Statement, regulations allow the impact on the General Fund Balance to be spread over future years. The council has a policy of spreading the gain or loss over the term that was remaining on the loan against which the premium was payable or discount receivable when it was repaid. The reconciliation of amounts charged to the Comprehensive Income and Expenditure Statement to the net charge required against the General Fund Balance is managed by a transfer to or from the Movement in Reserves Statement, taken to or from the Financial Instrument Adjustment Account.

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Debt Redemption:

The council sets aside a statutory amount each year from its General Fund revenue account for debt redemption, in the form of a Minimum Revenue Provision, as required by the Local Authority (Capital Finance and Accounting) regulations.

Minimum Revenue Provision

The council has charged 2011/12 statutory General Fund Minimum Revenue Provision (MRP) at 4% of the opening Capital Financing Requirement for all capital expenditure financed by borrowing incurred before 2008/09 and for all subsequent capital expenditure financed by supported borrowing. This is in line with Regulations implemented under the Local Government Act 2003. These Regulations have been supplemented by statutory guidance issued alongside the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2008. The Regulations place a duty on local authorities to make a prudent provision for debt redemption. The guidance sets out four options for the calculation of a prudent provision, with the first two being available only for supported expenditure. The other two options set out the methods for accounting for self-financed borrowing. The MRP for self-financed capital expenditure incurred in 2008/09 and beyond is calculated in accordance with Option 3 under which MRP is made in equal instalments over the expected life of the asset. The MRP calculation also provides for: • the repayment of capitalisation directions issued by the Secretary of State in respect of

expenditure incurred at Local Government Reorganisation; and • an adjustment in respect of commuted payments made to or for the benefit of the

council in 1992-1993. The one exception to this is that where assets are purchased for future development and it is anticipated that future sale proceeds will offset the cost, the repayment of debt will be funded from future capital receipts. In such cases MRP will not be applied.

Additional Debt Redemption:

In accordance with the Local Government Act 2003, the council may also choose to further redeem its outstanding loan debt by means of:

• additional revenue contributions; • use of capital receipts; • use of the Major Repairs Allowance.

Debt Restructuring:

The council has, on occasions when satisfactory market conditions prevail, restructured certain long term loans with the Public Works Loan Board. This results in either a premium being paid or a discount received and these are written down in accordance with current legislation (currently the Local Authorities (Capital Finance and Accounting) (Amendment)

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(England) Regulations 2007 (Statutory Instrument 2007 No. 573) as amended by the Local Authorities (Capital Finance and Accounting) (England) (Amendment) Regulations 2008 (Statutory Instrument 2008 No. 414)).

Financial Assets:

Financial Assets are classified into two types:

• Loans and receivables – assets that have fixed or determinable payments but are not quoted in an active market;

• Available for Sale Assets – assets that have a quoted market price and/or do not have fixed or determinable payments:

• Financial assets at fair value through profit or loss – assets classed as derivatives.

Loans and Receivables:

Loans and receivables are initially measured at fair value and carried at amortised cost. Annual credits to the Comprehensive Income and Expenditure Statement for interest receivable are based on the carrying amount of the asset multiplied by the effective rate of interest for the instrument. For all of the loans the council has made, this means that the amount presented in the Balance Sheet is the outstanding principal receivable and any accrued interest and interest credited to the Comprehensive Income and Expenditure Statement is the amount receivable for the year in the loan agreement. Where interest relates to 2011/12 which has not been paid by the 31st March 2012 this amount has been accrued and can be seen as part of the borrowing repayment on demand or within excess of 12 months.

Available for sale assets:

The council does not hold any available for sale financial assets.

Impairment of Financial Assets:

Where assets are identified as being impaired because of a likelihood arising from a past event then the payment due under contract will not be made, the asset is written down and a charge made to the Comprehensive Income and Expenditure Statement. Any gains or losses that arise on the derecognising of the asset are credited or debited to the Comprehensive Income and Expenditure Statement.

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13. FOREIGN CURRENCY TRANSLATION

Where the authority has entered into a transaction denominated in a foreign currency, the transaction is converted into sterling at the exchange rate applicable on the date the transaction was effective. Where material amounts in foreign currency are outstanding at the year-end, they would be reconverted at the spot exchange rate at 31st March. Resulting gains or losses would be recognised in the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement. However, in 2011/12 foreign currency transactions of the council are not considered to be material.

14. GOVERNMENT GRANTS AND OTHER CONTRIBUTIONS

Whether paid on account, by instalments or in arrears, government grants and third party contributions and donations are recognised as income at the date that the authority satisfies the conditions of entitlement to the grant/contribution, there is reasonable assurance that:

• The authority will comply with the conditions attached to the payments; and • The grants or contributions will be received.

Amounts recognised as due to the council are not credited to the Comprehensive Income and Expenditure Statement until conditions attached to the grant or contribution have been satisfied. Conditions are stipulations that specify that the future economic benefits or service potential embodied in the asset acquired using the grant or contribution are required to be consumed by the recipient as specified, or future economic benefits or service potential must be returned to the transferor. Monies advanced as grants and contributions for which conditions have not been satisfied are carried in the Balance Sheet as creditors. When conditions are satisfied, the grant or contribution is credited to the relevant service line (for attributable revenue grants and contributions) or Taxation and Non-Specific Grant Income line (for non-ring fenced revenue grants and all capital grants) in the Comprehensive Income and Expenditure Statement. Where capital grants are credited to the Comprehensive Income and Expenditure Statement, they are reversed out of the General Fund Balance in the Movement in Reserves Statement. Where the grant has yet to be used to finance capital expenditure, it is posted to the Capital Grant Unapplied Reserve. Where it has been applied, it is posted to the Capital Adjustment Account. Amounts in the Capital Grants Unapplied Reserve are transferred to the Capital Adjustment Account once they have been applied to fund capital expenditure.

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15. HERITAGE AND COMMUNITY ASSETS

The council’s collection of Heritage Assets is identified under the following categories: • Historical Buildings & Archaeological Sites • Museum & Archive Collections • Arts Collection • Civic Insignia These are assets with historical, artistic, scientific, technological, geophysical or environmental qualities that are held and maintained principally for their contribution to knowledge and culture. Heritage Assets acquired or constructed in 2011/12 are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the council’s accounting policy on Property, Plant and Equipment. However, the measurement bases in relation to each category of Heritage Assets held prior to 2011/12 are detailed below. The accounting policies for Heritage Assets that are deemed to include elements of intangible heritage assets are also presented below. The council’s collection of Heritage Assets is accounted for as follows: Historical Buildings & Archaeological Sites The council owns a variety of Historical Buildings and Archaeological Sites. Many of these are ‘designated heritage assets’ e.g. scheduled ancient monuments, listed buildings or assets within conservation areas and are of national significance. In addition to this, there are others that are ‘non-designated heritage assets’, i.e. those which have a degree of significance meriting consideration in planning decisions but are of local significance rather than national. The nature, scale and significance of these assets is not confined to a particular type or size and incorporates a range of listed buildings. Scheduled ancient monuments also involve a similarly broad range, including public infrastructure such as road bridges. Historical Buildings and Archaeological Sites are assessed by the Property Services Department with regards to meeting the CIPFA Code of Practice definition of Heritage Assets and donated assets. Insurance valuations are considered to establish whether their application would be appropriate and also whether a market value exists for each asset. The council undertakes a valuation where the information is available and appropriate. In most cases the council does not consider that comparable market value information can be obtained for its historical buildings and archaeological sites or that insurance valuations

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can be used in order for values to be established. This is because of the nature of the assets held. Museum & Archive Collections The Museum collection consists of just less than 5,000 collection items and relates to the significant history of Milton Keynes from pre-historic to present day. The Museum collection is held at Buckinghamshire’s County Museum. The Archive collection consists of deposited council and predecessor collections which constitutes a rich archival history of the area. The archives are held at the Centre for Buckinghamshire Studies, Aylesbury. The council currently adheres to the collecting policies of Buckinghamshire County Museum and the Centre for Buckinghamshire Studies (County Archives) who collect on the council’s behalf. The council does not consider that reliable cost or valuation information can be obtained for its museum and archive collections and would involve a disproportionate cost in comparison to the benefits to the users of the council’s financial statements. This is because of the diverse nature of the assets held and lack of comparable market values. Consequently the council does not recognise the assets on the Balance Sheet. Museum objects are usually donated and information is held at the Buckinghamshire County Museum. Archive material is generally deposited, not donated and relevant data is held on accession registers. Arts Collection The council’s public art collection is made up of in the region of 100 items of works of art. The collection includes sculptures, paintings, prints and artists designs integrated in public spaces and buildings. Reliable cost or valuation information is not readily available, the council believes that obtaining valuations for these items requires significant investment and currently the cost is prohibitive. However, the council acknowledges the need for a valuation review and plans are in place to undertake this work in the future. Consequently the council does not recognise these assets on the balance sheet this financial year but wishes to do so in future years. The council does not have any items in its arts collection which it can verify as being donated. Civic Insignia The council’s Mayoral Insignia comprises assets which are pertinent to the council’s position as a Borough i.e. chains of office for the Mayor, Deputy Mayor and respective consorts.

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Reliable cost or valuation information is not readily available and the council believes that the costs involved in obtaining this information are not commensurate with the benefits to the users of the financial statements. Consequently the council does not recognise these assets on the balance sheet. The council does not have any items in its civic Insignia collection which it can verify as being donated. 16. INSURANCE

To obtain insurance cover in the most cost effective manner the council arranges its insurance with a system of internal financing of claims (a substantial policy excess applies) and external cover with a recognised insurance market. Internal funds have been maintained to cover those claims that fall below the policy excess. These funds are based on the total potential liability that could accrue up to 31st March 2012. Some risks carry a lower policy excess and claims that fall below this amount are met from revenue as they arise. External cover is provided by way of premiums paid to the council’s Insurers. The nature of risks covered by the internal arrangements is shown below.

Risk Maximum Cover per Claim

Employers Liability £50,000 - Amounts in excess of this are covered externally.

Third Party £50,000 - Amounts in excess of this are covered externally.

Fire Damage £50,000 - Amounts in excess of this are covered externally.

Loss of School Contents £50,000 - Amounts in excess of this are covered externally.

Cash Loss The first £100 is met by the service concerned - amounts in excess of this are covered externally.

Loss of Computers The first £100 is met by the service concerned - amounts in excess of this are covered externally.

17. INTANGIBLE FIXED ASSETS

Expenditure on assets that do not have physical substance but are identifiable and controlled by the council (e.g. software licences) is capitalised when it will bring benefits to the council for more than one financial year. All intangible assets are recognised if it is probable that the expected future benefits attributable to the asset will flow to the council. Internally generated assets are recognised where the required criteria are met in line with the International Financial Reporting Standards Code of Practice.

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All Intangible Fixed Assets are included at historic cost and amortised on a straight line basis, over their economic lives from the year following acquisition. The economic lives are reviewed at the end of each reporting period and revised if necessary.

18. INTEREST IN COMPANIES

The Comprehensive Income and Expenditure Statement reflects all of the council’s revenue activities. The Balance Sheet has been prepared by aggregating the account balances of all of the council’s services and funds.

The council has considered whether or not Group Accounts should be prepared and has concluded that it has no material interest in companies and other entities that could be regarded as subsidiaries, associates or joint controlled entities and would require the council to prepare group accounts.

The council is invited to appoint Members to many entities of local, regional and national significance. These appointments have been examined; together with Members own declarations of interest, along with those of all Assistant Directors, Heads of Service and Corporate Leadership Team. No material reportable interests were identified. Minority interests in companies are detailed in note 38 to the Financial Statements.

Significant contractual relationships are disclosed in note 37 to the Financial Statements.

19. INVENTORIES, WORK IN PROGRESS AND LONG TERM CONTRACTS

Inventories are included in the Balance Sheet at the lower of cost and net realisable value. The cost of inventories is assigned using the (First In, First Out/Weighted Average) costing formula.

Long term contracts are accounted for on the basis of charging the surplus or deficit on the provision of services with the value of works and services received under the contract during the financial year.

Certain repair works undertaken by the council are rechargeable to private concerns and individuals. Incomplete works and works not yet recharged are accounted for at cost. 20. INVESTMENT PROPERTIES

Investment property is property (land or a building, or part of a building, or both) that is held solely to earn rentals or for capital appreciation or both. An investment property is recognised as an asset when and only when:

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• It is probable that the future economic benefits that are associated with the investment property will flow to the entity, and;

• The cost or fair value of the investment property can be measured reliably.

Investment properties are measured at cost initially. The cost of an investment property includes its purchase price, transaction costs and directly attributable expenditure. After initial recognition, investment properties are measured at fair value. The fair value of an investment property reflects market conditions at the Balance Sheet date. Investment properties are not depreciated but are revalued annually according to market conditions at the end of each year. 21. LANDFILL ALLOWANCE SCHEMES

The Waste and Emissions Trading Act 2003 places a duty on waste disposal authorities to reduce the amount of biodegradable municipal waste (BMW) disposed to landfill. In April 2005 it introduced a trading scheme, which allocates tradable landfill allowances. The Landfill Allowances Trading Scheme gives rise to an asset for allowances held; grant income and a liability for actual BMW landfill usage. Full details of the Landfill Allowances Trading Scheme can be found in Note 19 to the Financial Statements. 22. LEASES

Leases are classified as finance leases where the terms of the lease transfer substantially all of the risks and rewards incidental to ownership of the property, plant or equipment from the lessor to the lessee. All other leases are classified as operating leases. Where a lease covers both land and buildings, the land and buildings elements are considered separately for classification. Arrangements that do not have the legal status of a lease but convey a right to use to use an asset in return for payment are accounted for under this policy where fulfilment of the arrangement is dependant on the use of specific assets. The Authority as Lessee Finance Leases Property, plant and equipment held under finance leases is recognised on the Balance Sheet at the commencement of the lease at its fair value measured at the lease’s inception (or the present value of the minimum lease payments, if lower). The asset recognised is matched by a liability for the obligation to pay the Lessor. Initial direct costs of the authority are added to the carrying amount of the asset. Premiums paid on entry into a lease are applied to writing down the lease liability. Contingent rents (where applicable) are charged as expenses in the periods in which they are incurred.

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Lease payments are apportioned between:

• A charge for the acquisition of the interest in the property, plant or equipment – applied to write down the lease liability, and:

• A finance charge (debited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

Property, plant and equipment recognised under finance leases is accounted for using the policies applied generally to such assets, subject to depreciation being charged over the lease term if this is shorter than the asset’s estimated useful life (where ownership of the asset does not transfer to the authority at the end of the lease period). The authority is not required to raise Council Tax to cover depreciation or revaluation and impairment losses arising on leased assets. Instead a prudent annual contribution is made from revenue funds towards the deemed capital investment in accordance with statutory requirements. Depreciation and revaluation and impairment losses are therefore substituted by a revenue contribution in the General Fund Balance, by way of an adjusting transaction with the Capital Adjustment Account in the Movement in Reserves Statement for the difference between the two. Operating Leases Rentals paid under operating leases are charged to the Comprehensive Income and Expenditure Statement as an expense of the service benefiting from use of the leased property, plant and equipment. Charges are made on a straight line basis over the life of the lease; even if this does not match the pattern of payments (e.g. there is a rent free period at the commencement of the lease). The Authority as Lessor Finance Leases Where the authority grants a finance lease over a property or an item of plant or equipment, the relevant asset is written out of the Balance Sheet as a disposal. At the commencement of the lease, the carrying amount of the asset in the Balance Sheet (whether property, plant, equipment or assets held for sale) is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. A gain, representing the authority’s net investment in the lease, is credited to the same line in the Comprehensive Income and Expenditure Statement also as part of the gain or loss on disposal (i.e. netted off against the carrying value of the asset at the time of the disposal), matched by a lease (long term debtor) asset in the Balance Sheet. Lease rentals receivable are apportioned between:

• A charge for the acquisition of the interest in the property – applied to write down the lease debtor (together with any premiums received), and;

• Finance income (credited to the Financing and Investment Income and Expenditure line in the Comprehensive Income and Expenditure Statement).

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The gain credited to the Comprehensive Income and Expenditure Statement on disposal is not permitted by statute to increase the General Fund Balance and is required to be treated as a capital receipt. Where a premium has been received, this is posted out of the General Fund Balance to the Capital Receipts Reserve in the Movement in Reserves Statement. Where the amount due in relation to the lease asset is to be settled by the payment of rentals in future financial years, this is posted out of the General Fund Balance to the Deferred Capital Receipts Reserve in the Movement in Reserves Statement. The written off value of disposals is not a charge against Council Tax, as the cost of fixed assets is fully provided for under separate arrangements for capital financing. Amounts are therefore appropriated to the Capital Adjustment Account from the General Fund Balance in the Movement in Reserves Statement. Operating Leases Where the authority grants an operating lease over a property or an item of plant or equipment, the asset is retained in the Balance Sheet. Rental income is credited to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement. Credits are made on a straight line basis over the life of the lease, even if this does not match the pattern of payments (e.g. there is a premium paid at the commencement of the lease). Initial direct costs incurred in negotiating and arranging the lease are added to the carrying amount of the relevant asset and charged as an expense over the lease term on the same basis as rental income. 23. NON-CURRENT ASSETS HELD FOR SALE

Recognition and measurement: When it becomes probable that the carrying amount of an asset will be recovered principally through a sale transaction rather than through its continuing use, it is reclassified as an asset held for sale. For council assets to be classified as ‘held for sale’ strict criteria are met in line with the International Financial Reporting Standards (IFRS) Code of Practice:

• the asset is available for sale in its present condition; • the sale is highly probable; • the asset is being actively marketed for a sale price that is reasonable in relation to its

current fair value; • the sale is expected to qualify for recognition as a completed sale within one year of

classification as held for sale and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Assets held for sale are measured at the lower of their carrying amount and fair value (market value) less costs to sell at initial reclassification and at the end of each reporting date. Depreciation is not charged on assets held for sale.

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Where the definition of assets held for sale or investment property is not met by assets that are surplus to the service needs, the assets will be held as a ‘surplus assets’ under Property, Plant and Equipment. 24. OVERHEADS

The costs of both centrally and departmentally provided overheads (i.e. management and administration costs) and support services are fully recharged to those services that benefit from the supply or service in accordance with the costing principles of the CIPFA Service Reporting Code of Practice 2011/12 (SeRCOP). The total absorption costing principle is used - the full cost of overheads and support services are shared between users in proportion to the benefits received, with the exception of:

• Corporate and Democratic Core is defined in the Service Reporting Code of Practice and consists of Democratic Representation and Management costs and Corporate Management costs.

• Non Distributed Costs - the cost of discretionary benefits awarded to employees retiring early and impairment losses chargeable to Assets Held for Sale.

The basis of allocations and apportionment of Support Services are as detailed below. The remaining areas were calculated on a time recording basis.

Support service Allocation method

Audit Gross income plus gross expenditure

Communications 80% internal: MKC Full Time Equivalents 20% external: Direct charge to Corporate and Democratic Core

Customer Service MKC head count

Facilities Floor space allocated across central buildings

Finance – Corporate Director 80% Corporate Democratic Core, 20% general finance

Finance - General Time allocations

Health and Safety MKC head count Human Resources - Corporate 20% corporate democratic core, 80% general HR

Human Resources - General MKC head count

IT general PCs in use (as per IT inventory)

Procurement Budgeted non-payroll expenditure for the year

Partnership Public, Private & Partnership plus agreed/expected changes

Policy and Performance 20% Corporate and Democratic Core, 80% MKC head count

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25. PROPERTY, PLANT AND EQUIPMENT

Property, Plant and Equipment (PPE) are tangible assets (i.e. assets that have physical substance) and are held for use in the provision of services, or for administrative purposes, and are expected to be used for more than one period.

Recognition:

Expenditure on the acquisition, creation or enhancement of property, plant and equipment is capitalised on an accruals basis, provided that it yields benefits to the council and the services that it provides last for more than one financial year. Expenditure that secures but does not extend the previously assessed standard of performance of an asset (e.g. repairs and maintenance) is charged to revenue as it is incurred.

Measurement:

Assets are carried in the Balance Sheet using the following measurement bases and with a guideline de minimis level of £10,000.

Infrastructure, community assets and assets under construction (excluding investment property) are measured at historical cost. All other classes of asset, including surplus assets, are measured at fair value. Specialist properties are valued using depreciated replacement cost. The fair value of council dwellings are measured using existing use value – social housing.

Assets included in the Balance Sheet at carrying amount are revalued where there have been material changes in the value, but as a minimum every five years.

Estimation Techniques

The accounting policy specifies the basis on which an item is measured. However, where there is uncertainty over the monetary amounts corresponding to the measurement bases selected for assets, liabilities, gains, losses and changes in reserves the amount is arrived at using an estimation technique that most closely reflects the economic reality of the transaction.

Disposals:

When an asset is disposed of or decommissioned, the carrying amount of the asset in the Balance Sheet is written off to the Other Operating Expenditure line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal. Receipts from disposals (if any) are credited to the same line in the Comprehensive Income and Expenditure Statement as part of the gain or loss on disposal (i.e. netted off against the carrying amount of the asset at the time of disposal). Any revaluation gains in the Revaluation Reserve are transferred to the Capital Adjustment Account. The usable proportion of Housing capital receipts is net of claw back payments to the Homes and Communities Agency on former Milton Keynes Development Corporation properties and net of amounts subject to pooling arrangements under the Local Government Act 2003. The balance of receipts is required to be credited to the Capital Receipts Reserve, and can

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then only be used for new capital investment or set aside to reduce the council’s underlying need to borrow (the capital financing requirement). Receipts are appropriated to the Reserve from the Movement in Reserves Statement. The net cost of disposals is not a charge against Council Tax, as the cost of non current assets is fully provided for under separate arrangements for capital financing. Amounts are appropriated to the Capital Adjustment Account from the Movement in Reserves Statement. Impairment: At the end of each reporting period an assessment is undertaken to determine whether there is any indication that assets may be impaired. If any indication exists, the recoverable amount is estimated having regard to the concept of materiality in identifying whether the recoverable of any specific asset needs to be estimated. All impairment losses on re-valued assets are recognised in the Revaluation Reserve up to the amount in the Revaluation Reserve for each respective asset. Any excess is charged to the relevant service revenue account in the Comprehensive Income and Expenditure Statement. Impairment Losses and Revaluation Losses: A clear distinction is made between impairment losses and revaluation losses. Impairment losses are losses attributable to consumption of economic benefit or a fall in prices that are specific to an asset. Revaluation losses are any related losses attributable to a general fall in prices that are not specific to an asset. As with impairment losses, the relevant service revenue account will be charged when the balance on the Revaluation Reserve for any specific asset has been used in full against the relevant revaluation loss.

Depreciation:

Depreciation is provided for on all assets with a determinable finite life (except for investment properties), by allocating the value of the asset in the Balance Sheet over the periods expected to benefit from their use.

Depreciation is provided in accordance with the following policy on all assets (except for investment properties) where, at the time of acquisition or revaluation, a finite useful life can be determined: a. Newly acquired assets are depreciated from the year following acquisition. Assets in

the course of construction are not depreciated until they are brought into use;

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b. Depreciation is calculated by allocating the costs (or re-valued amounts), less the estimated residual value of the relevant assets, on a straight line basis over their useful economic lives. This is deemed to be the most appropriate method given the nature of the assets held by the Council;

c. Depreciation is calculated on the opening balances. Transactions in year including additions and revaluations are not charged depreciation until the following year.

d. The bases for calculating the lives of different classes of assets at acquisition are as follows:

PPE: Other Buildings, Community Assets and Surplus Assets

60 years life from the completion date.

PPE: Council Dwellings Actual life of Right To Buy council dwelling. Shared Ownership Dwellings not depreciated

PPE: Vehicles, Plant and Equipment

Varies from 3 to 40 years according to the estimated life of each asset.

PPE: Infrastructure 40 years in respect of highways, 20 years for other assets.

Investment Properties

Not depreciated.

Assets Held for Sale Not depreciated.

Land Not depreciated.

• The useful lives of assets are reviewed regularly. Where necessary, the life of an asset

is revised and the carrying amount of the asset is then depreciated over the remaining useful life;

• Council dwellings – for Right to Buy council dwellings depreciation is calculated on an actual life basis. No depreciation is charged on shared ownership dwellings.

• Revaluation gains are also depreciated. An amount equal to the difference between current value depreciation actually charged on assets and the depreciation that would have been charged based on their historical cost is transferred each year from the Revaluation Reserve to the Capital Adjustment Account.

The major repairs allowance (MRA) is a source of Central Government funding for Housing Revenue Account capital expenditure, introduced in April 2001. The MRA is intended to reflect the cost of maintaining housing stock in its current condition and is an annual cash payment made to Local Authorities through the Housing Revenue Account Subsidy system. The council can use the MRA as a proxy for depreciation on HRA Council dwellings where the actual depreciation based on asset lives does not materially differ from the MRA allocation for the financial year. Other operational HRA assets are depreciated on a straight-line basis over the remaining expected life of the asset.

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Revaluation Reserve: The Revaluation Reserve contains revaluation gains recognised since 1st April 2007 only, the date of its formal implementation when it was created with a zero balance. Gains arising before that date have been consolidated into the Capital Adjustment Account. Componentisation: Where an item of Plant, Property and Equipment asset has major components whose cost is significant in relation to the total cost of the item, the components are depreciated separately. Asset groups have been identified for property (building) assets which categorise assets with similar characteristics into relevant groups for their potential impact on depreciation calculations. The average net book value (NBV) of each property (building) asset group has been used to set the de minimis threshold level as the table below illustrates. Materiality Table for Componentisation Average NBV of Asset Group: De-minimis Threshold Under £500k £500k Between £500K - £1.0m £1.0m Between £1.0M - £1.5m £1.5m Between £1.5M - £2.0m £2.0m

The average NBV of each asset group has been compared with the materiality table to identify the relevant de-minimis level. The de-minimis level of each asset group will be reviewed annually. Some specialist property sites have been assessed by using their individual net book values as their materiality level. Property assets which are identified for review by the valuer are assessed in relation to three types of component with useful lives as follows: Type of Property Component Component Useful Life Structure of Building Normally 60 years Mechanical and Electrical 25 years Externals Normally 60 years

A component is considered to be significant if it is more than 10% of the total cost of the property asset (building).

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26. PROVISIONS, CONTINGENT LIABILITIES AND CONTINGENT ASSETS

Provisions are made where an event has taken place that gives the authority a legal or constructive obligation that probably requires settlement by a transfer of economic benefits or service potential, and a reliable estimate can be made of the amount of the obligation. For instance, the authority may be involved in a court case that could eventually result in the making of a settlement or the payment of compensation. Provisions are charged as an expense to the appropriate service line in the Comprehensive Income and Expenditure Statement in the year that the authority becomes aware of the obligation, and are measured at the best estimate at the Balance Sheet date of the expenditure required to settle the obligation taking into account relevant risks and uncertainties. When payments are eventually made, they are charged to the provision carried in the Balance Sheet. Estimated settlements are reviewed at the end of each financial year – where it becomes less probable that a transfer of economic benefits will now be required (or a lower settlement than anticipated is made), the provision is reversed and credited back to the relevant service. Where some or all of the payment required to settle a provision is expected to be recovered from another party (e.g. from an insurance claim), this is only recognised as income for the relevant service if it is virtually certain that reimbursement will be received if the authority settles the obligation. The Carbon Reduction Commitment Scheme The authority is required to participate in the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. This scheme is currently in its introductory phase which will last until 31st March 2014. The authority is required to purchase and surrender allowances, currently retrospectively, on the basis of emissions i.e. carbon dioxide produced as energy is used. As carbon dioxide is emitted (i.e. as energy is used), a liability and an expense are recognised. The liability will be discharged by surrendering allowances. The liability is measured at the best estimate of the expenditure required to meet the obligation, normally at the current market price of the number of allowances required to meet the liability at the reporting date. The cost to the authority is recognised and reported in the costs of the authority’s services and is apportioned to services on the basis of energy consumption. Landfill Allowances Scheme Landfill Allowances, whether allocated by DEFRA or purchased from another Waste Disposal Authority (WDA) are recognised as current assets and are initially measured at fair value. Landfill allowances allocated by DEFRA are accounted for as a government grant. After initial recognition, allowances are measured at the lower of cost and net realisable value.

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As landfill is used, a liability and an expense are recognised. The liability is discharged either by surrendering allowances or by payment of a cash penalty to DEFRA (or by a combination). The liability is measured at the best estimate of the expenditure required to meet the obligation, normally the market price of the number of allowances required to meet the liability at the reporting date. However, where some of the obligation will be met by paying a cash penalty to DEFRA, that part of its liability is measured at the cost of the penalty. Contingent Liabilities A contingent liability arises where an event has taken place that gives the authority a possible obligation whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the authority. Contingent liabilities also arise in circumstances where a provision would otherwise be made but either it is not probable that an outflow of resources will be required or the amount of the obligation cannot be measured reliably. Contingent liabilities are not recognised in the Balance Sheet but disclosed in a note to the accounts. Contingent Assets A contingent asset arises where an event has taken place that gives the authority a possible asset whose existence will only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the authority. Contingent assets are not recognised in the Balance Sheet but disclosed in a note to the accounts where it is probable that there will be an inflow of economic benefits or service potential. 27. RESERVES

The council sets aside specific amounts as reserves for future policy purposes or to cover contingencies. Reserves are created by appropriating amounts in the Statement of Movement on the General Fund Balance. When expenditure to be financed from a reserve is incurred, it is charged to the appropriate service revenue account in that year to score against the Net Cost of Services in the Comprehensive Income and Expenditure Statement. The reserve is then appropriated back into the General Fund Balance statement so that there is no net charge against council tax for the expenditure.

Certain reserves are kept to manage the accounting processes for tangible fixed assets (Revaluation Reserve and Capital Adjustment Account) and retirement benefits and do not represent usable resources for the Council – these reserves are explained in the relevant policies below and note 31 to the Financial Statements.

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28. REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE

Expenditure incurred during the year that may be capitalised under statutory provision but does not result in the creation of a non current asset is charged as expenditure to the relevant service revenue account in the Comprehensive Income and Expenditure Statement in the year. Where the council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer in the Movement in Reserves Statement from the General Fund Balance to the Capital Adjustment Account then reverses out the amounts charged so there is no impact on the level of council tax. Types of expenditure in this category include improvement grants to owner-occupiers to improve the quality of the housing stock in the area. 29. VAT

Income and expenditure excludes any amounts related to Value Added Tax (VAT), as all VAT collected is payable to Her Majesty’s Revenue and Customs (HMRC) and all VAT paid is recoverable from it.

Where VAT is not recoverable, it is charged to the appropriate service within the Net Cost of Services in the Comprehensive Income and Expenditure Statement.

Movement in Reserves Statement

42

This statement shows the movement in the year on the different reserves held by the authority, analysed into ‘usable reserves’ (i.e. those that can be applied to fund expenditure or reduce local taxation) and other reserves. The Surplus or (Deficit) on the Provision of Services line shows the true economic cost of providing the authority’s services, more details of which are shown in the Comprehensive Income and Expenditure Statement. These are different from the statutory amounts required to be charged to the General Fund Balance and the Housing Revenue Account for council tax setting and dwellings rent setting purposes. The Net Increase /Decrease before Transfers to Earmarked Reserves line shows the statutory General Fund Balance and Housing Revenue Account Balance before any discretionary transfers to or from earmarked reserves undertaken by the council.

General Earmarked Schools Housing Earmarked Capital Capital Total Unusable TotalFund General Fund Balances Revenue HRA Grants Receipts Usable Reserves Authority

Balance Reserves Reserve Account Reserves Unapplied Reserve Reserves Reserves2011/12 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance at 31 March 2011 (7,014) (18,095) (9,152) (3,566) (4,528) (20,233) (4,728) (67,316) (523,567) (590,883)

Surplus or (Deficit) on Provision of Services (Accounting Basis) (12,983) 0 0 184,423 0 0 0 171,440 0 171,440Other Comprehensive Expenditure and Income 0 0 0 0 0 0 0 0 106,362 106,362Total Comprehensive Expenditure and Income (12,983) 0 0 184,423 0 0 0 171,440 106,362 277,802Adjustments between Accounting Basis & Funding Basis under Regulations (Note 6) 1,151 0 0 (186,408) 0 (12,260) (23) (197,540) 199,499 1,959Net (Increase) / Decrease before Transfers to Earmarked Reserves (11,832) 0 0 (1,985) 0 (12,260) (23) (26,100) 305,861 279,761Transfers (to) / from Earmarked Reserves (Note 7)

9,920 (8,317) (1,603) 40 (40) 0 0 0 0 0

Transfers (to) / from Other Reserves 130 0 0 0 0 0 (130) 0 0 0(Increase) / Decrease in Year (1,782) (8,317) (1,603) (1,945) (40) (12,260) (153) (26,100) 305,861 279,761Balance at 31 March 2012 (8,796) (26,412) (10,755) (5,511) (4,568) (32,493) (4,881) (93,416) (217,706) (311,122)


43

General Earmarked Schools Housing Earmarked Capital Capital Total Unusable TotalFund General Fund Balances Revenue HRA Grants Receipts Usable Reserves Authority

Balance Reserves Reserve Account Reserves Unapplied Reserve Reserves Reserves2010/11 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Balance at 31 March 2010 (7,018) (13,838) (9,585) (6,058) (2,095) (14,972) (5,362) (58,928) (543,755) (602,683)Surplus or (Deficit) on Provision of Services (Accounting Basis) (31,714) 0 0 134,281 0 0 0 102,567 0 102,567Other Comprehensive Expenditure and Income 0 0 0 0 0 0 0 0 (92,726) (92,726)Total Comprehensive Expenditure and Income (31,714) 0 0 134,281 0 0 0 102,567 (92,726) 9,841Adjustments between Accounting Basis & Funding Basis under Regulations (Note 6) 27,846 0 0 (134,222) 0 (5,261) 682 (110,955) 112,914 1,959Net (Increase) / Decrease before Transfers to Earmarked Reserves (3,868) 0 0 59 0 (5,261) 682 (8,388) 20,188 11,800Transfers (to) / from Earmarked Reserves (Note 7)

3,824 (4,257) 433 2,433 (2,433) 0 0 0 0 0

Transfers (to) / from Other Reserves 48 0 0 0 0 0 (48) 0 0 0(Increase) / Decrease in Year 4 (4,257) 433 2,492 (2,433) (5,261) 634 (8,388) 20,188 11,800Balance at 31 March 2011 (7,014) (18,095) (9,152) (3,566) (4,528) (20,233) (4,728) (67,316) (523,567) (590,883)

Comprehensive Income and Expenditure Statement

44

This statement shows the accounting cost in the year of providing services in accordance with generally accepted accounting practices, rather than the amount to be funded from taxation. The council raises taxation to cover expenditure in accordance with regulations; this may be different from the accounting cost. The taxation position is shown in the Movement in Reserves Statement.

31 March 2012Gross Gross Net Gross Gross NetExp Income Exp Exp Income Exp

£'000 £'000 £'000 £'000 £'000 £'000 Note

77,822 (21,823) 55,999 Adult Social Care 74,609 (19,968) 54,64132,487 (21,976) 10,511 Central Services 26,103 (20,139) 5,964

324,928 (249,355) 75,573 Children & Education Services 263,892 (198,396) 65,49625,632 (2,598) 23,034 Culture & Related Services 18,262 (2,305) 15,95729,533 (4,730) 24,803 Environmental & Regulatory Unit 29,225 (4,141) 25,08429,877 (13,575) 16,302 Highways and Transport Services 30,446 (16,180) 14,266

101,278 (95,098) 6,180 Housing Services 112,133 (101,583) 10,55047,987 (50,673) (2,686) Housing Revenue Account 61,286 (51,466) 9,82010,603 (5,319) 5,284 Planning Services 8,895 (7,687) 1,208

0 0 0 Exceptional Item - HRA Self Financing 170,360 0 170,360 8134,487 0 134,487 Exceptional Item - Local Authority Housing

Impairment of Dwellings0 0 0

0 (56,331) (56,331) Exceptional Item - IAS19 Past Service costs 0 0 0625 0 625 Exceptional Item - Procurement Services 0 0 0

815,259 (521,478) 293,781 Cost of Services 795,211 (421,865) 373,346 Other Operating Expenditure

4,850 Precepts 4,997439 Levies 439878 Payment to the Housing Capital Receipt Pool 458

9,714 (Gain)/Loss on Disposal of non-Current Assets 7,426 415,881 Total Other Operating Expenditure 13,320

15,551 Interest Payable and Similar Charges 15,477(1,253) Interest and Investment Income (1,797)

(433) (Surplus)/Deficit on Trading Operations (568) 9

0Income, expenditure and changes in the fair value of investment properties (211)

9,934 2,739 4223,799 15,640

0 Surplus or Deficit on Discontinued Operations 0Taxation and Non-Specific Grant Income

(98,248) Council Tax Income (98,599) 18(76,225) Non-Domestic Rate Income (67,596) 18(30,497) Capital Grants & Contributions (27,166) 18(25,924) Non-Ringfenced Government Grants (37,505) 18

(230,894) Total Taxation and Non-Specific Grant Income (230,866)

102,567 (Surplus) or Deficit on Provision of Services 171,440

(4,902) (11,238) 31(87,824) 117,600 42(92,726) Other Comprehensive Income and Expenditure 106,362

9,841 Total Comprehensive Income and Expenditure 277,802

Restated31 March 2011

Actuarial (gains) / losses on pension assets / liabilities(Surplus) or deficit on revaluation of Non-Current Assets

Pension Interest Cost and Expected Return on Pension AssetsTotal Financing and Investment Income and Expenditure

Financing and Investment Income and Expenditure

Balance Sheet

45

The Balance Sheet shows the value as at the Balance Sheet date of the assets and liabilities recognised by the authority. The net assets of the authority (assets less liabilities) are matched by the reserves held by the authority. Reserves are reported in two categories. The first category of reserves are usable reserves, i.e. those reserves that the authority may use to provide services, subject to the need to maintain a prudent level of reserves and any statutory limitations on their use (for example the Capital Receipts Reserve that may only be used to fund capital expenditure or repay debt). The second category of reserves is those that the authority is not able to use to provide services. This category of reserves includes reserves that hold unrealised gains and losses (for example the Revaluation Reserve), where amounts would only become available to provide services if the assets are sold; and reserves that hold timing differences shown in the Movement in Reserves Statement line ‘Adjustments between accounting basis and funding basis under regulations’.

Restated31 March 2011 Note 31 March 2012

£'000 £'000973,322 Property, Plant & Equipment 20 954,586

0 Heritage Assets 21 1220,132 Investment Property 22 20,2833,091 Intangible Assets 24 2,3855,000 Long Term Investments 35 10,000

572 Long Term Debtors 26 8971,002,117 Long Term Assets 988,163

67,433 Short Term Investments 35 89,647907 Assets held for sale 25 733869 Inventories and Work in Progress 27 347

68,650 Short Term Debtors 26 60,1019,593 Cash and Cash Equivalents 32 2,872

147,452 Current Assets 153,700(18,374) Bank Overdraft 32 (10,853)(17,353) Short Term Borrowing 29 (18,823)(55,941) Short Term Creditors 28 (54,046)

(551) Short Term Provisions 30 (870)

(5,482) Short Term Capital Grants & Contributions Receipts in Advance 18 (6,499)

(9,867)Short Term Revenue Grants & Contributions Receipts in Advance 18 (10,683)

(107,568) Current Liabilities (101,774)(1,380) Long Term Provisions 30 (1,379)

(283,204) Long Term Borrowing 29 (438,564)(4,108) Other Long Term Liabilities 36 (2,899)

(142,165) Liability Related to Defined Benefit Pension Scheme 42 (263,933)

(1,120)Long Term Capital Grants & Contributions Receipts in Advance 18 (695)

(19,141) Long Term Revenue Grants & Contributions Receipts in Advance 18 (21,497)

(451,118) Long Term Liabilities (728,967)590,883 Net Assets 311,12267,316 Usable Reserves 31 93,416

523,567 Unusable Reserves 31 217,706590,883 Total Reserves 311,122

Cash Flow Statement

46

The Cash Flow Statement shows the changes in cash and cash equivalents of the authority during the reporting period. The statement shows how the authority generates and uses cash and cash equivalents by classifying cash flows as operating, investing and financing activities. The amount of net cash flows arising from operating activities is a key indicator of the extent to which the operations of the authority are funded by way of taxation and grant income or from the recipients of services provided by the authority. Investing activities represent the extent to which cash outflows have been made for resources which are intended to contribute to the authority’s future service delivery. Cash flows arising from financing activities are useful in predicting claims on future cash flows by providers of capital (i.e. borrowing) to the authority. Restated2010/11 2011/12

£'000 £'000

(102,567) Net surplus or (deficit) on the provision of services (171,440)

127,108Adjustments to net surplus or deficit on the provision of services for non cash movements 25,151

306Adjustments for items included in the net surplus or deficit on the provision of services that are investing and financing activities 453

24,847 Net Cash flow from Operating Activities (Note 33) (145,836)Investing Activities

(63,007) Purchase of Property, Plant & Equipment, Investing Properties and Intangible Fixed Assets

(29,171)

(187,383) Purchase of short-term and long-term investments (171,760)(878) Other payments for investing activities (458)

10,165 Proceeds of Property, Plant & Equipment, Investing Properties and Intangible Fixed Assets

1,484

180,336 Proceeds of short-term and long-term investments 144,76032,832 Other receipts from investing activities 48,331

(27,935) Net cash flows from investing activities (6,814)

Financing Activities

0 Cash receipts of short and long-term borrowing 170,3601,319 Other receipts from financing activities 348

0 Cash payments for the reduction of the outstanding liability relating to finance leases and on Balance Sheet PFI Contracts 0

0 Repayment of short and long-term borrowing (15,000)(2,226) Other payments for financing activities (2,258)

(907) Net cash flows from financing activities 153,450

(3,995) Net increase or (decrease) in cash and cash equivalents 800

(4,787) Cash and cash equivalents at the beginning of the reporting period (8,781)(8,782) Cash and cash equivalents at the end of the reporting period (Note 32) (7,981)

Notes to the Accounts

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1. 2010/11 COMPARATOR RESTATEMENTS

Comprehensive Income and Expenditure Statement Following the introduction of the Service Expenditure Reporting Code of Practice (SERCoP), which took effect from 1st April 2011, the 2010/11 information disclosed in the Comprehensive Income and Expenditure Statement has been reviewed and restated to ensure full compliance with the new requirements of the SERCoP. This has not resulted in a change to the overall Cost of Services (£293,781,000) but has changed the allocation between Service Expenditure headings. Balance Sheet The table below presents a reconciliation of the 2010/11 published Balance Sheet to the restated comparator Balance Sheet used in the 2011/12 accounts.

Published Restated31 March 2011 31 March 2011

i ii iii£'000 £'000 £'000 £'000 £'000

Long Term Assets 1,003,024 (907) 0 0 1,002,117Current Assets 146,545 907 0 0 147,452Current Liabilities (125,352) 0 (1,357) 19,141 (107,568)Long Term Liabilities (433,334) 0 1,357 (19,141) (451,118)Net Assets 590,883 590,883

Assets Held for Sale

Short Term leases

Revenue Grants & Contributions

I. Reclassification of Assets Held for Sale as Current Assets II. Reclassification of Finance lease liabilities as Current Liabilities III. The 2011/12 Code of Practice included new extended guidance following the

implementation of International Financial Reporting Standards (IFRS) on accounting for revenue grants and contributions. This included adapting the Balance Sheet presentation to be consistent with Capital Grants and Contributions Receipts in Advance.

Cash Flow Statement The Cash Flow Statement contains two lines which specifically relate to the purchase of and the proceeds from short term and long term investments. Transactions for purchase of Investments and proceeds of investments were netted off where both occurred within the year. This has now been corrected and both lines have been amended to reflect the gross activity within purchase and proceeds. Officer Remuneration – Note 16 In previous years Foundations Schools and Voluntary Aided schools employees were included in the Officer Remuneration disclosure. The employees of these schools are formally employed by the Governors of the school and not controlled by Milton Keynes Council, for this reason the employees of these schools receiving more the £50,000


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remuneration for the year have been excluded in 2011/12 disclosure and the 2010/11 comparators has been restated. Capital Expenditure – Note 23 In 2010/11 following the adoption of International Financial Reporting Standards (IFRS), certain finance lease liabilities were recognised on the Balance Sheet where applicable. The calculation of the Capital Financing Requirement (CFR) has since been amended (Prudential Code for Capital Finance update, November 2011), to specifically include long-term liabilities recognised on the Balance Sheet. This has been reflected in the 2011/12 CFR position. The 2010/11 CFR figures for the 2011/12 final accounts have also been restated to include this change (£5,465,000). 2. ACCOUNTING STANDARDS THAT HAVE BEEN ISSUED BUT NOT YET ADOPTED

The Code of Practice requires authorities to disclose information relating to the impact of an accounting change that will be required by a new standard that has been issued but not yet adopted by the Code. In October 2010, IFRS7 Financial Instruments: Disclosures (Transfers of Financial Assets) was issued and resulted in a change in accounting policy that will apply from 1st April 2012. The objective of the amendment is to provide users of financial statements with information to help them to evaluate the exposure to risk related to transfers of financial assets, and the effect of those risks on an entity’s financial position. It is not anticipated that this amendment to the standard will have a significant impact on the council’s financial statements for 2012/13. 3. ASSUMPTIONS ABOUT THE FUTURE, OTHER MAJOR SOURCES OF

ESTIMATION UNCERTAINTY AND CRITICAL JUDGEMENTS IN APPLYING ACCOUNTING POLICIES

In the application of the council’s accounting policies, management is required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from those estimates and the estimates and underlying assumptions are continually reviewed. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision effects only that period, but will be reflected in both the period in which the revision takes place and future periods should the revision also have an impact on future periods.

Critical Judgements

There is a high degree of uncertainty about future levels of funding for local government. However, the authority has determined that this uncertainty is not yet sufficient to provide


49

an indication that the assets of the authority might be impaired as a result of a need to close facilities and reduce levels of service provision.

Estimation Uncertainty The authority is required to disclose details of all key estimations and assumptions made within the accounts that could result in an uncertainty and could have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. Identification of items likely to be compiled using estimates

The accounts are compiled in accordance with statutory guidance for both revenue and capital, and this directs attention to those items that require estimation. In addition, there are a number of controls in place which ensure that accounting estimates are identified and applied where necessary. The Financial Procedure Rules underpin the Financial Regulations and both documents provide the framework for the financial administration of the council and set out the processes that need to be followed to ensure that sound financial management is maintained, expenditure and income are properly accounted for during the year and that where necessary, estimations are applied. During the course of the financial year, no circumstances have given rise to the need for the authority to review or compile new accounting estimates of a significant nature, although new provisions for liabilities have been created and these are discussed in greater detail below. The main accounting estimates in application along with the degree of associated estimation uncertainty are as follows: Contingent Assets and Liabilities A contingent asset or liability arises where an event has taken place that gives the authority a possible asset or liability whose existence can only be confirmed by the occurrence or otherwise of uncertain future events not wholly within the control of the authority. Contingent assets and liabilities do not result in a carrying value on the Balance Sheet and for this reason, there is no possibility of a material mis-statement within the accounts as a result of a change in circumstances. Details of each contingent asset or liability is provided in note 41 to the Financial Statements.


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Defined Benefit Pension Scheme The council participates in the Local Government Pension Scheme (LGPS) which is administered by Buckinghamshire County Council. The disclosures provided within the Statement of Accounts are taken from the annual Actuary report, provided by Barnett Waddingham and full details of the scheme can be found in note 42 to the Financial Statements. Long Term Obligations under a Public Private Partnership On 1st January 2004, the council entered into a twelve year contract with HBS, now trading as Mouchel Business Services Ltd. Full details of this arrangement are provided in note 37 to the Financial Statements (Long Term Contracts). Landfill Allowance Liability The estimated liability is based upon actual tonnages used in Performance Indicator data for the period of April to December 2011 and multiplied against a profile to calculate the estimate for the year. From this, the liability in tonnage for the year is calculated. This liability is then valued using the average price of a Landfill Allowance Trading Scheme (LATS) permit based upon the valuation provided by DEFRA. Each year the liability is recalculated using the same process. This is always discharged once the final tonnage figures are confirmed in September of each following financial year. Full details of the scheme can be found in note 19 to the Financial Statements. Annual Leave and Flexi time Accrual The cost of annual leave and flexi-time entitlement earned but not taken by employees at the end of the reporting period is recognised in the Financial Statements based on actual leave and flexi-time balances at the 31st March 2012. In respect of schools staff, who do not receive an annual leave or flexi-time allowance, the calculation of benefits due in 2011/12 is based on the number of days in each term. The Accumulated Absence Account can be found in note 31 to the Financial Statements. Provisions A provision is created or maintained where an event has taken place that gives the authority a legal or constructive obligation that probably requires settlement by a transfer of economic benefits, and where a reliable estimate can be made of the amount of the obligation. Provisions are reviewed on an annual basis, using a best estimate of expenditure required to settle the obligation, taking into account relevant risks and uncertainties. Full details of each provision including the basis of estimation applied are provided in note 30 to the Financial Statements.


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Allowance for Non-Payment of Debt The council maintains an allowance for the non-payment of debts in order to ensure that there are sufficient funds available to meet the future cost of any debt that is uncollectible. The value of the allowance is calculated based on a review of all debts and a judgement of the probability of collection for each. Most categories of Local Authority debt are not subject to substantial fluctuation and past experience can be used within material limits to judge the percentage of debt that may not be recovered. The council evaluates each debt or category of debt by considering any significant financial difficulty for the borrower, any breach of contract or default, any concessions granted by the authority based on difficulty for the borrower, the likelihood of the borrower entering bankruptcy and any observable data indicating a measurable decrease in future estimated cash flows. Property, Plant and Equipment and Investment Properties The basis of Property, Plant and Equipment valuation is determined according to the guidance within the International Financial reporting Standards Code of Practice and also guidance set out in the Royal Institution of Chartered Surveyors Red Book. The Statement of Accounts contains comprehensive disclosures in respect of Property Plant and Equipment. Full details of the basis of valuation can be found in Accounting Policy note 25, and non-current asset values are provided in note 20 to the Financial Statements. Finance lease liabilities The key judgement involved in the calculation of the liability resulting from finance leases is that of the useful life of each leased asset. In order to establish the useful life, service users are asked to confirm the useful life remaining and where any uncertainty exists, leasing advisors are consulted. Full details of the council’s lease arrangements can be found in note 36 to the Financial Statements. Measurement of Financial Instrument Fair Values Borrowing and investments are estimated based on fair value. The calculation is based on net present value which is an estimate of the value of payments due in the future in today’s terms. Balances for borrowings and investments are carried on the Balance Sheet at amortised cost. Fair values are supplied as a note to the Financial Instrument disclosures. Financial Instrument disclosures can be found in note 35 to the Financial Statements.


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4. MATERIAL ITEMS OF INCOME AND EXPENSE

The following significant gains and losses are reflected within the 2011/12 accounts:

Total (Gain)/Loss Note£'000

Disposals of Items of Property, Plant & Equipment:

Green Park and Tickford Park Schools and Land Adjacent to Walton High 7,207 i

Other Minor Disposals 219

Total (Gain)/Loss on Disposal of Non-Current Assets 7,426

Notes:

i. Green Park and Tickford Park Schools gained foundation status in year. The Land adjacent to Walton High School was not previously transferred when the School transferred to Foundation status.

There has been no reversal of unused provisions in 2011/12. 5. MATERIAL EVENTS AFTER THE BALANCE SHEET DATE

The Statement of Accounts was authorised for issue by the Corporate Director Resources on 25th September 2012. Events taking place after this date are not reflected in the Financial Statements or notes. Where events taking place before this date provided information about conditions existing at 31st March 2012, the figures in the Financial Statements and notes have been adjusted in all material respects to reflect the impact of this information. Purchase of Saxon Court Saxon Court is one of the two main administrative buildings used by Milton Keynes Council along with the Civic Offices. On 3rd July 2012, the council ended the lease arrangement with Aberdeen Asset Management Ltd and made a payment of £11.5m to purchase the building from them outright. Longrigg and Caldecotte Education Centres On 1st April 2012, the services provided at the Longrigg Outdoor Education Centre and the Caldecotte Centre were transferred to Action for Youth to continue with the provision of the services. The assets (property and equipment) will be transferred to Action for Youth at a value of £1 following completion of the legal transfer in 2012/13. The combined value of the assets reported as part of the council’s Balance Sheet at 31st March 2012 was £1.102m and these will be written out of the Balance Sheet during 2012/13.


53

The Gatehouse School On 1st April 2012, the Gatehouse School closed and became the Stephenson Academy. The assets (property and equipment) were transferred to the Academy on 1st April 2012 at nil value. The value of the school reported as part of the council’s Balance Sheet at 31st March 2012 was £2.753m and will be written out of the Balance Sheet during 2012/13. Fenny Lock Travellers Site At a meeting of Cabinet on 18th April 2012, it was decided that work on the Fenny Lock Travellers Site development should cease. The costs incurred in developing the site prior to this decision are held in the Balance Sheet as Assets under Construction at a value of £547,000. This balance will be written out of the Balance Sheet during 2012/13. Public Private Partnership Arrangement with Mouchel Business Services Ltd On 5th September, Milton Keynes Council agreed that officers could enter into negotiations with Mouchel Business Services. The intention of the negotiations is to transfer services delivered under the contract in Milton Keynes to the council, along with the relevant staff, assets and licences and to convert the contract into a framework (to be extended to 2018). This would allow Mouchel to continue to provide services such as SAP support and other specialist services provided by the wider Mouchel to the council. The council will have the flexibility to use Mouchel to deliver services under this contract, where this provides value for money. The proposed Heads of Terms for negotiations, would result in the council making an upfront payment to Mouchel and ceasing to pay the Unitary Charge (i.e. the fixed annual cost of the contract); Mouchel would potentially benefit from the release of the Performance Bond and the Pensions Bond (i.e. funds retained as surety in respect of service delivery and pension fund). Negotiations are currently ongoing and no agreement has yet been reached, so there is no confirmed date for a change to the contract. However, these negotiations will have been concluded before 31st March 2013, and it is anticipated that if an agreed position can be reached the amendment to the contract and the resulting transfer of staff and assets will also be completed before 31st March 2013. Transfer of Assets from the Housing and Communities Agency Immediately after the 2010 General Election, and in line with the Government’s “localism” agenda, the council began negotiations with the Homes and Communities Agency (HCA) to transfer HCA land assets to the council along with development control powers in the expansion areas and responsibility for inward investment (which transferred in August 2011). The Council proposes to purchase the assets from the HCA for £32m and to take on the development control powers and management of the Milton Keynes Tariff, which is a forward funding mechanism to deliver infrastructure in the expansion areas.


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Complex negotiations have been under way for some considerable time and agreement is expected to be reached with Treasury and the Department of Local Government and Communities shortly. Subject to this agreement, it is intended that the transfer of assets, the development control powers and responsibility for the operation of the Tariff will take place on 1st December 2012. 6. ADJUSTMENTS BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER

REGULATIONS

General Fund Balance The General Fund is the statutory fund into which all the receipts of an authority are required to be paid, out of which all liabilities of the authority are to be met, except to the extent that statutory rules might provide otherwise. These rules can also specify the financial year in which liabilities and payments should impact on the General Fund Balance, which is not necessarily in accordance with proper accounting practice. The General Fund Balance therefore summaries the resources that the council is statutorily empowered to spend on its services or on capital investment (or the deficit of resources that the council is required to recover) at the end of the financial year. The balance is not available to be applied to funding HRA services.

Housing Revenue Account Balance The Housing Revenue Account Balance reflects the statutory obligation to maintain a revenue account for local authority council housing provision in accordance with Part VI of the Local Government and Housing Act 1989. It contains the balance of income and expenditure as defined by the 1989 Act that is available to fund future expenditure in connection with the council’s landlord function or (where in deficit) that is required to be recovered from tenants in future years. Major Repairs Reserve The authority is required to maintain the Major Repairs Reserve, which controls the application of the Major Repairs Allowance (MRA). The MRA is restricted to being applied to new capital investment in HRA assets or the financing of historical capital expenditure by the HRA. Capital Receipts Reserve The Capital Receipts Reserve holds the proceeds from the disposal of land or other assets, which are restricted by statute from being used other than to fund new capital expenditure or to be set aside to finance historical capital expenditure. The balance on the reserve shows the resources that have yet to be applied for these purposes at the year end. The Capital Receipts Reserve balance is broken down as follows:


55

2010/11 2011/12£'000 £'000

(5,362) Balance at 1 April (4,728)(10,135) Capital Receipts in year from Sale of Assets (1,326)

(8) Capital Receipts in year from Repayments of Advances (28)(22) Other Capital Receipts in year (102)

(15,527) (6,184)Less:

1,661 Capital Receipts applied to finance capital expenditure 6,683 8,260 Deferred Capital Receipts in year from Sale of Assets (5,838)

878 Statutory Pooling 458 10,799 1,303

(4,728) Balance at 31 March (4,881) Capital Grants Unapplied Reserve

The Capital Grants Unapplied Reserve holds the grants and contributions received towards capital projects for which the council has met the conditions that would otherwise require repayment of the monies but which have yet to be applied to meet capital expenditure. The balance is restricted by grant terms as to the capital expenditure against which it can be applied and/or the financial year in which this can take place. The balance can be analysed as follows:

General Fund£'000 £'000 £'000

Balance at 1 April 2011 (20,231) (2) (20,233)

Capital Grants and Contributions credited to the Comprehensive Income & Expenditure StatementGovernment Grants (23,662) 0 (23,662)Third Party Contributions (3,506) 2 (3,504)

Applied Capital Grants and ContributionsGovernment Grants 11,441 0 11,441Third Party Contributions 3,465 0 3,465

Balance at 31 March 2012 (32,493) 0 (32,493)

HRA Total


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2011/12

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Acc

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Cap

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Res

erve

Cap

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rant

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£'000 £'000 £'000 £'000 £'000 £'000Adjustments primarily involving the Capital Adjustment Account:Reversal of items debited or credited to the Comprehensive Income & Expenditure Statement:Charges for depreciation and impairment of non-current assets (18,999) (23,949) 0 0 0 42,948

Revaluation Losses on Property, Plant and Equipment (6,698) (1,160) 0 0 0 7,858Movements in the market value of Investments 150 0 0 0 0 (150)

Amortisation of intangible fixed assets (695) (22) 0 0 0 717

Capital grants and contributions applied 0 0 0 0 14,906 (14,906)

Revenue Expenditure Funded from Capital Under Statute (1,611) 7 0 0 0 1,604

Amounts of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement (7,438) (1,313) 0 0 0 8,751

Use of the Major Repairs Reserve to finance new capital expenditure 0 8,092 0 0 0 (8,092)HRA Self Financing 0 (170,360) 0 0 0 170,360

Insertion of items not debited or credited to the Comprehensive Income and Expenditure Statement:Statutory provision for the financing of capital investment 10,848 96 0 0 0 (10,944)

Capital expenditure charged against the General Fund and HRA balance 499 1,176 0 0 0 (1,675)Adjustments primarily involving the Capital Grants Unapplied Account:Capital grants and contributions unapplied credited to the Comprehensive Income and Expenditure Statement 27,166 0 0 0 (27,166) 0

Usable Reserves

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2011/12

Gen

eral

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d B

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Acc

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Usa

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Cap

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erve

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£'000 £'000 £'000 £'000 £'000 £'000Adjustments primarily involving the Capital Receipts Reserve:Transfer of cash sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement 124 1,202 (1,326) 0 0 0

Use of the Capital Receipts Reserve to finance new capital expenditure 0 0 6,683 0 0 (6,683)

Contribution from the Capital Receipts Reserve to finance payments to the Government capital receipts pool

(458) 0 458 0 0 0

Transfer from Deferred Capital Receipts Reserve upon receipt of cash 0 0 (5,838) 0 0 5,838

Adjustments Primarily involving the Major Repairs Reserve:Reversal of Major Repairs Allowance credited to the HRA 0 (8,092) 0 8,092 0 0

Use of the Major Repairs Reserve to finance new capital expenditure 0 8,092 0 (8,092) 0 0Adjustments primarily involving the Financial Instruments Adjustment Account:Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

(7) (16) 0 0 0 23

Adjustments primarily involving the Pensions Reserve:Reversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement (18,308) (579) 0 0 0 18,887

Employers pensions contributions and direct payments to pensioners payable in year 14,268 451 0 0 0 (14,719)

Adjustments primarily involving the Collection Fund Adjustment Account:Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

335 0 0 0 0 (335)

Usable Reserves

Mov

emen

t in

Unu

sabl

e R

eser

ves


58

2011/12

Gen

eral

Fun

d B

alan

ce

Hou

sing

R

even

ue

Acc

ount

Usa

ble

Cap

ital

Rec

eipt

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Res

erve

Cap

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rant

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£'000 £'000 £'000 £'000 £'000 £'000Adjustment primarily involving the Accumulated Absences Account:Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

16 (33) 0 0 0 17

Adjustments in respect of Local Government Reorganisation:Voluntary additional payment of LGR Debt 1,959 0 0 0 0 0Total Adjustments 1,151 (186,408) (23) 0 (12,260) 199,499

Usable Reserves

Mov

emen

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2010/11 Comparators

Gen

eral

Fun

d B

alan

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Hou

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R

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Acc

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Cap

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Adjustments primarily involving the Capital Adjustment Account: £'000 £'000 £'000 £'000 £'000

Reversal of items debited or credited to the Comprehensive Income & Expenditure StatementCharges for depreciation and impairment of non-current assets (23,865) (8,583) 0 0 32,448

Revaluation Losses on Property, Plant and Equipment (3,767) (134,878) 0 0 138,645

Amortisation of intangible fixed assets (743) (25) 0 0 768

Capital grants and contributions applied 0 0 0 25,236 (25,236)

Revenue Expenditure Funded from Capital Under Statute (10,322) (22) 0 0 10,344

Amounts of non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement (18,881) (943) 0 0 19,824

Use of the Major Repairs Reserve to finance new capital expenditure 0 4,897 0 0 (4,897)

Insertion of items not debited or credited to the Comprehensive Income and Expenditure StatementMinimum Revenue Provision 10,421 0 0 0 (10,421)

Capital expenditure charged against the General Fund and HRA balance 217 3,132 0 0 (3,349)Adjustments primarily involving the Capital Grants Unapplied Account:Capital grants unapplied transferred to the Capital Grants Unapplied Account where grant conditions have been satisfied 30,497 0 0 (30,497) 0

Usable Reserves

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2010/11 Comparators

Gen

eral

Fun

d B

alan

ce

Hou

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R

even

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Acc

ount

Usa

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Cap

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Rec

eipt

s R

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Adjustments primarily involving the Capital Receipts Reserve: £'000 £'000 £'000 £'000 £'000Transfer of cash sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement 8,935 1,175 (10,110) 0 0

Use of the Capital Receipts Reserve to finance new capital expenditure 0 0 1,661 0 (1,660)

Contribution from the Capital Receipts Reserve to finance payments to the Government capital receipts pool(878) 0 878 0 0

Transfer from Deferred Capital Receipts Reserve upon receipt of cash 0 0 8,253 0 (8,253)

Adjustments primarily involving the Financial Instruments Adjustment AccountAmount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements (7) (43) 0 0 50

Adjustments primarily involving the Pensions ReserveReversal of items relating to retirement benefits debited or credited to the Comprehensive Income and Expenditure Statement 17,489 553 0 0 (18,042)

Employers pensions contributions and direct payments to pensioners payable in year 15,281 483 0 0 (15,764)

Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements 1,349 0 0 0 (1,349)

Amount by which officer remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements 162 32 0 0 (194)

Voluntary additional payment of LGR Debt 1,959 0 0 0 0Total Adjustments 27,846 (134,222) 682 (5,261) 112,914

Adjustments in respect of Local Government Reorganisation:

Usable Reserves

Mov

emen

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Unu

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ves

Adjustments primarily involving the Collection Fund Adjustment Account

Adjustment primarily involving the Accumulated Absences Account:


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7. TRANSFERS TO/ FROM EARMARKED RESERVES

This note sets out the amounts set aside from the General Fund and Housing Revenue Account balances in Earmarked Reserves to provide financing for future expenditure plans and the amounts transferred from Earmarked Reserves to meet General Fund and Housing Revenue Account expenditure in 2011/12.

Bal

ance

at

31

Mar

ch 2

010

Tran

sfer

s O

ut

2010

/11

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s In

20

10/1

1

Bal

ance

at

31

Mar

ch 2

011

Tran

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2011

/12

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s In

20

11/1

2

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ance

at

31

Mar

ch 2

012

£'000 £'000 £'000 £'000 £'000 £'000 £'000General Fund Schools Balances (9,585) 433 0 (9,152) 0 (1,603) (10,755)Allow for Non-Payment of Debt Reserve (748) 523 0 (225) 170 (171) (226)Building Asset Renewal Reserve 0 0 (1,250) (1,250) 0 (21) (1,271)SALIX Reserve (500) 74 0 (426) 426 (500) (500)Repairs & Renewals Reserve (347) 0 0 (347) 0 0 (347)Budget Rollovers Reserve (1,686) 69 0 (1,617) 804 (1,356) (2,169)Planning Gains Reserve (1,666) 0 (137) (1,803) 614 (933) (2,122)Benefit Subsidy Reserve (579) 217 0 (362) 429 (525) (458)Insurance Reserve (3,059) 712 0 (2,347) 1,069 (398) (1,676)Debt Financing Reserve (471) 0 (77) (548) 0 0 (548)Lease Rental Equalisation Reserve (49) 0 0 (49) 0 0 (49)Saxon Court Dilapidation Reserve (200) 0 (200) (400) 0 (300) (700)Revenue Financing Reserve (292) 0 (209) (501) 0 (1) (502)One-Off Expenditure Reserve (325) 0 (1,619) (1,944) 1,783 (1,763) (1,924)New Homes Bonus 0 0 0 0 0 (2,873) (2,873)CCTV Reserve (101) 0 0 (101) 0 (54) (155)Landfill Allowances Reserve (123) 0 (66) (189) 66 (46) (169)Car Parking Surplus (311) 0 (144) (455) 143 (478) (790)Radcliffe Reserve 0 0 (1,575) (1,575) 1,063 0 (512)Redundancy & Reorganisation Reserve 0 0 (588) (588) 390 (1,006) (1,204)Strategic Restructuring Reserve 0 0 0 0 222 (984) (762)Value for Money Reserve (1,560) 21 0 (1,539) 19 0 (1,520)Adult Social Care Reserve (200) 0 (450) (650) 0 (200) (850)Children Demand Reserve 0 0 (462) (462) 17 (200) (645)Corporate Property Reserve 0 0 0 0 0 (500) (500)NNDR Funding Volatility Reserve 0 0 0 0 0 (748) (748)Legal Fees Reserve 0 0 0 0 0 (700) (700)HCA Asset Reserve 0 0 0 0 0 (530) (530)Economic Development Reserve 0 0 0 0 0 (400) (400)Other Earmarked Reserves (1,394) 822 0 (572) 730 (1,583) (1,425)Capital Reserve - General Fund (227) 0 82 (145) 6 0 (139)Total General Fund Earmarked Reserves (23,423) 2,871 (6,695) (27,247) 7,951 (17,873) (37,169)

Allow for Non-Payment of Debt Reserve (1,147) 400 0 (747) 186 0 (561)Other Earmarked Reserves (292) 192 0 (100) 0 (410) (510)Capital Reserve - HRA (656) 0 (3,025) (3,681) 184 0 (3,497)Total HRA Earmarked Reserves (2,095) 592 (3,025) (4,528) 370 (410) (4,568)Total Earmarked Reserves (25,518) 3,463 (9,720) (31,775) 8,321 (18,283) (41,737)


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The nature and purpose of these reserves is as follows: Schools Balances The sums in the table below represent the reserves built up by schools from their delegated budgets. They are ring fenced for use by schools and are not therefore available to the council for general use.

31 Mar 2011Net Surplus Deficit Net

£'000 £'000 £'000 £'000

(81) Nursery (172) 0 (172)(6,662) Primary (8,119) 0 (8,119)

(195) Secondary (120) 0 (120)(313) Special (725) 42 (683)

(7,251) (9,136) 42 (9,094)

(1,901) Foundation (1,661) 0 (1,661)

(9,152) Total Schools Balance (10,797) 42 (10,755)

31 March 2012

Allowance for Non-Payment of Debt Reserve Local Authorities are required to calculate an allowance for impairment on loans and receivables in place of the Bad Debt Provision used in previous years. The allowance is calculated on an incurred losses basis, and this has resulted in a lower sum than was previously recognised in the Balance Sheet. The Code of Practice states that authorities are able to create an Earmarked Reserve where material differences exist between the Bad Debt Provision and the new Allowance for Non-Payment of debt. A project is ongoing to review all aged debt, and this reserve will be used to offset the cost to the council of any resulting write-offs. Building Asset Renewal Reserve The purpose of this reserve is to recognise that there are a number of Building Assets held by Milton Keynes Council which require funds for their upkeep. The reserve recognises that to fulfil responsibilities as a property owner, funds need to be set aside to avoid adverse impact on the General Fund. SALIX Reserve The SALIX Reserve holds funding for carbon management schemes. The council has agreed to establish and operate a local fund to assist in reducing energy use within its boundary through the uptake of energy saving and renewable energy technologies. The reserve holds the funding received from SALIX and the match funding put into the local fund by the council as outlined in the terms of the funding agreement.


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Repairs and Renewals Reserve Bradwell Abbey - The reserve is held to ensure, firstly, that the council’s obligations in respect of Bradwell Abbey are appropriately funded and, secondly, that a contingency fund is built to fund anticipated periodic major expenditure on the fabric of this historic building. The reserve is accessed by the budget holder in response to approved requests from the City Discovery Centre for payment of necessary repairs/improvements. Footpaths - This reserve holds monies received from developers for improvements on footpaths within Fishermead. Budget Rollovers Reserve This reserve represents monies which are rolled forward and set aside to fund specific projects in future years. They are assessed each year to ensure that the funding is necessary and that the relevant project is still required. Planning Gains Reserve The purpose of a planning obligation is to address the impact arising from a proposed development and to require the landowner to undertake measures to make the planning application acceptable to the local planning authority. The council can negotiate planning gains from developers where a need is identified for infrastructure and facilities, which arises from the new development. Therefore, there is a direct relationship between the impact on the local infrastructure created by the new development and what the council should be seeking. The planning gains identified are, in almost every case, linked to a specific parish or area within the council where a main development has taken place. The purposes stated for the use of such gains range from general use (e.g. improvements to physical or social infrastructure) to somewhat more specific requirements such as provision of public artwork. In a few instances, the use can cover a wide area for example public access or transport initiatives. Benefit Subsidy Reserve This reserve was set up to cover potential liabilities resulting from possible over-claimed benefit subsidies identified in the audit of such claims. The reserve covers the potential of having the 100% subsidy incentive on LA error overpayments above the lower threshold raised in the 2011/12 claim being clawed back. The Benefits Service has hit the lower threshold levels of LA error overpayments, which means that a 100% subsidy can be claimed on these overpayments. The subsidy claim will be audited from June 2012 (with a deadline for submission of the audited claim at the end of November). Eighty cases are checked in detail on the subsidy audit. If one case is found to be coded incorrectly (i.e. coded as Claimant error and should have been LA error), the Audit Commission will ask the council to do further testing. Dependent upon the results of further testing there is a potential for the error to be extrapolated. If the extrapolation then brings the level of LA error overpayments above the thresholds, then there is potential for 100% of the incentive (at worst) and 40% of the incentive (at best) to be clawed back.


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Insurance Reserve The council’s insurance arrangements involve both internal and external cover. Internal cover is provided by way of an earmarked reserve for all claims notified to the council by 31st March each year (the amount provided for those claims being based on advice from the council’s Insurers). Some risks are not fully funded, with losses up to a specified amount being met from revenue as they arise. To obtain insurance cover in the most cost effective manner, the council has chosen to carry excesses in respect of claims made under liability and material damage insurances. A reserve has been set up from the council’s internal funds to cover self-insured risks. This reserve is based on the total potential liability that could accrue up to 31st March 2012. Details of the internal insurance arrangements are provided in the Accounting Policy note 16. Debt Financing Reserve This reserve was established during 2004/05 to fund debt financing budget shortfalls that may arise due to factors beyond the control of the council Lease Rental Equalisation Reserve This reserve was established during 2004/05 to manage the budget implications of the change in accounting treatment of lease rentals from cash to an accruals basis. Saxon Court Dilapidation Reserve This reserve was established in 2009/10 in recognition of the council’s commitment that on relinquishment of its lease it will return the Saxon Court premises to the standard of the building at the commencement of the contract, or to pay an agreed equivalent cash sum to the landlord. The balance will be built up year-on-year, to reach £1.2m by 2015. Revenue Financing Reserve This reserve includes monies for arts and sports endowments to cover the cost of facilities planned for construction, traffic calming and the cost of maintaining and repairing works of art within the borough. One Off Expenditure Reserve This reserve was set up in 2009/10 to finance One-off expenditure items in 2010/11 budget and future years. New Homes Bonus Reserve This new reserve was set up in 2011/12 to hold the new homes bonus paid to the council. The Cabinet agreed this funding would be used in a strategic manner to support growth in the borough.


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CCTV Reserve This reserve is for the funding for the partnership project between Milton Keynes Council and Thames Valley Police to construct and equip the new CCTV control room at Thames Valley Police station Landfill Allowance Reserve This reserve was established during 2005/06 to comply with statutory requirements. The reserve can be used when the amount of biodegradable municipal waste (BMW) land-filled exceeds that permitted in any year. Car Parking Surplus Reserve The Parking Surplus Reserve was set up under the terms of Section 55 of the Road Traffic Regulation Act 1984. The reserve holds any surplus achieved through the provision of on-street parking (known as the Road Charging Scheme under the Transport Act 2000) to be spent in accordance with the Act. This reserve was previously called Special Parking Reserve. Radcliffe Reserve This reserve was set up in 2010/11 as part of the sale of land at Radcliffe School to David Wilson Homes. There are various future commitments under the deal and the funds held in this reserve are held to ensure that funds are available to meet the next tranche of payments in 2012/13. The reserve will be assessed on a regular basis as property values move and any overage under the deal can be better evaluated. Redundancy and Reorganisation reserve This reserve was created from one-off underspends in 2010/11 to meet the forecast costs of redundancies arising from reductions and restructuring of services in response to the financial pressure the council is facing. Strategic Restructuring Reserve This new reserve was set up in 2011/12 for the front-loading effects of cuts to the voluntary sector and to develop key front-line services in innovative and sustainable ways to reduce future costs. Value for Money Reserve This reserve was set up to ensure adequate funding for invest to save schemes, which delivers a return on initial investment over a number of years. Adult Social Care Reserves In Adult Social Care there are reserves for Learning Disability Ordinary Residency (£200,000), demand-led pressures in Older People Services (£200,000), demand-led


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pressures in Learning Disability Services (£200,000), and Sheltered Housing modernisation of Older People Services (£250,000). Children’s Demand Reserve This reserve is to fund potential additional costs arising from an increase in demand for children’s services. Corporate Property Reserve Under the existing lease the council is required to vacate Saxon Court in 2019, at which point the intention is to move from Central Milton Keynes to a new site. There is potential for considerable revenue costs incurred in this project and this reserve was set up to cover these costs. NNDR Funding Volatility Reserve Government proposals may result in the council’s funding from April 2013 being based on actual Business Rate income. While a safety net will operate, this will not mitigate the potential volatility in this funding stream. This reserve has been created to mitigate the increased risk. Legal Fees Reserve The Organisational Transformation Programme includes some significant plans for outsourcing activity, which may require appropriate support and legal advice to deliver. In addition, the size of the council means there are often legal claims in progress. Homes and Community Agency Asset Reserve As part of the proposed Homes and Community Agency asset purchase and Tariff negotiations, potential one-off costs of transition have been identified. The council has highlighted a requirement for these to be met from earmarked reserves, hence a reserve has been created for this purpose.

Economic Development Reserve The council’s Corporate Plan outlines a commitment to Economic Development. Some funding has been included in Budget Proposals to support this work, but it is likely that as the Marketing Strategy and Inward Investment work progresses, some in year projects may be identified.


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Other Reserves These reserves comprise monies to cover the costs of Lakes Regeneration of (£100,000), set aside in 2009/10 to fund consultation services on the future of the Lakes Estate. Maintenance budget underspends have been set aside to be utilised in future years on areas such as Access MK (£56,000). There are a number of new reserves set up within 2011/12 such as the Demand Led Pressures in Housing Reserve (£100,000), Compulsory Purchase Order 5 Waterside Peartree Reserve (£200,000), Warren Bank Reserve (£310,000), costs arising from the end of the Mouchel Contract (£300,000), Events Reserve (£100,000), Block Improvements (£100,000), Local Service Support Grant (£221,000), and Public Health Transition Reserve (£100,000). There are also a number of small reserves such as HR Training Reserve, IT Reserve, Building Control Reserve, Broadband Trading Service Reserve, Music Service Reserve, Pensions Year 1 Reserve, Meeting Place Reserve, Ouse Valley Link Reserve, Energy Efficiency Fund Reserve, and the Parking Facilities Reserve.

Capital Reserve The General Fund and Housing Revenue Account Capital Reserve holds contributions from the Comprehensive Income and Expenditure Statement and Housing Revenue Account to fund capital expenditure. The balance at year end represents those amounts unapplied during 2011/12. These will be carried forward to fund capital expenditure in 2012/13 and future years. The balance can be analysed as follows:

General Housing TotalFund Revenue

Account£'000 £'000 £'000

Balance at 1 April 2011 (145) (3,681) (3,826)Revenue Contributions 6 184 190

Balance at 31 March 2012 (139) (3,497) (3,636)


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8. EXCEPTIONAL ITEMS

In 2011/12, Milton Keynes Council has disclosed one prominent item as exceptional in the Comprehensive Income and Expenditure Statement order to provide a fair view of the accounts. The housing subsidy system and HRA ring-fence was introduced by part IV of the Local Government and Housing Act 1989. This set out the requirement to keep an HRA and enabled subsidy to be paid and received based on formulae determined by the Secretary of State. In October 2010, the Localism Bill was introduced to Parliament and included powers to replace the subsidy system with a self-financing system which would result in a one off payment to or from government depending on whether the council is in negative or positive subsidy under the old arrangements. The figures that make up each authority’s settlement are based on an assumption of future rents less future allowances. Once the settlement has been made, authorities are required to manage with the income they have in future without recourse to the Government if stock condition deteriorates. On 28th March 2012, Milton Keynes Council paid the Government £170,360,000 under the Self Financing Scheme, and took out equivalent borrowing to fund the payment. 9. TRADING OPERATIONS

The authority has established 10 trading units where the service manager is required to operate in a commercial environment and balance their budget by generating income from other parts of the authority or other organisations.

2010/11 2011/12 2011/12 2011/12(Surplus)/ Expenditure Turnover (Surplus)/

Deficit Deficit£'000 £'000 £'000 £'000

(490) Commercial Properties 832 (838) (6)(5) Building 1,572 (1,372) 200

(582) Transport Fleet 2,679 (3,104) (425)(4) Emberton Park 251 (274) (23)15 Stores 569 (676) (107)

(85) Highways 6,652 (7,007) (355)20 Vehicle Maintenance 611 (603) 8

578 Landscape 4,440 (4,249) 191 58 Hospitality Services 42 (75) (33)62 Broadband 414 (432) (18)

(433) Net (Surplus)/Deficit on Trading Accounts 18,062 (18,630) (568)


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Commercial Properties The council received a number of commercial properties in June 1992, following the wind-up of the Development Corporation. The council receives income from these properties and this income is offset against any expenditure incurred by the service. Building A unit is maintained by the council to undertake small building maintenance works. This includes the Synergy Depot and key holding services. Transport Fleet Neighbourhood Services provides a fleet management service for the council. Emberton Park Neighbourhood Services continued to manage the operation of Emberton Park throughout 2011/12. Stores The stores area provides a wide range of materials for all the trading activities within Neighbourhood Services. It also provides a service for all other areas of Milton Keynes Council on a commercial basis. Highways The Highways DSO work group undertakes a range of highways maintenance and construction activities for a number of areas of the council, primarily for the Highways and Transport Group. This includes a 24 hour emergency service and winter gritting, snow clearing etc. Vehicle Maintenance Neighbourhood Services operates vehicle maintenance for the council. It also provides an MOT testing service and operates vehicle checking on behalf of Taxi Licensing. Landscape Neighbourhood Services carries out landscape maintenance work for the council, as well as schools and public bodies in the area. Hospitality Services Resources – Public Access carries out a catering hospitality service to officers and members of the council to service meetings and functions. Broadband This service provides broadband (MKSchools.net) to schools and receives subscription income from them. The capital costs are funded by the schools, and they have the option to use MKSchools.net as their broadband provider.


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10. ACQUIRED AND DISCONTINUED OPERATIONS

There were no operations acquired or discontinued during 2011/12 and therefore no disclosure required. However, on 1st April 2012, the council handed responsibility for the Longrigg and Caldecotte Outdoor Education Centres to Action for Youth, with the full legal transfer scheduled to take place in the first quarter of 2012/13. Full details can be found under Material Events after the Balance Sheet Date (note 5). 11. AGENCY SERVICES

The council acts as an agent for Homes and Communities Agency in providing street lighting. The costs of £28,000 (2010/11 £23,000) are fully recovered and the net cost to the council is £nil. Since 2003, the council has acted as an agent for Milton Keynes Primary Care NHS Trust in respect of the provision of nursing care to residents in care homes and the payment for that care. Expenditure of £1,700,000 (2010/11 £1,734,000) was fully recovered during the year. 12. MEMBERS ALLOWANCES

The authority paid the following amounts to members of the council during 2011/12:

2010/11 2011/12

£'000 £'000

500 Basic Allowances 504 226 Other Allowances 218 22 Expenses 7

748 TOTAL 729 Details of each Member’s individual payments are published annually on the council’s website.


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13. EXTERNAL AUDIT COSTS

The authority has incurred the following costs in relation to the audit of the Statement of Accounts, certification of grant claims and statutory inspections and to non-audit services provided by the authority’s external auditors:

2010/11 2011/12£'000 £'000

421 Fees payable to the Audit Commission with regard to external audit services carried out by the appointed Auditor 328

0 Fees payable to the Audit Commission in respect of statutory inspection 0

49 Fees payable to the Audit Commission for the certification of grant claims and returns 56

0 Fees payable in respect of other services provided by the appointed auditor 0

470 384


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14. ROAD CHARGING SCHEMES UNDER THE TRANSPORT ACT 2000

The council was designated a Permitted and Special Parking Area from 25th March 2002, and is required under Section 55 of the Road Traffic Regulation Act 1984 and the Traffic Management Act 2004 to keep an account of income and expenditure relating to these responsibilities.

2010/11 2011/12£'000 £'000

Expenditure1,484 Contractors Management Fee 1,575

63 Pay and Display Installation Costs 8098 Staffing Cost 114

261 Supplies and Services 397200 Support Costs 24524 Surveys and Fees 1429 Decriminalised Costs 3993 Signing Costs 325 Landscaping 5

123 Street Lighting 16511 Highway Management 814 Gully Emptying 12

2,405 Total Expenditure 2,686

Income(795) Excess Charge/Penalty Charge Notices (749)(712) Business Permits (873)(22) Suspensions (17)

(556) Scratch Cards (703)(6,248) Pay and Display Income (6,960)

(8,333) Total Income (9,302)

(5,928) Surplus achieved in year (6,616)

144 Transfer to Special Parking Reserve 478

(5,784) Surplus for the year (6,138)

The surplus of (£6,138,000) has been fully spent during the year to fund a variety of traffic and transportation projects. Examples of such projects undertaken include highway improvement design and project management (£427,000), off-street car parks (£528,000), concessionary fares (£4,357,000), bus subsidies (£2,648,000), the passenger transport team, publicity, Routel, studies and project development, promotion, minibus driving testing and bus infrastructure.


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15. POOLED BUDGETS

Section 75 of the National Health Act 2006 allows partnership arrangements between NHS bodies, local authorities and other agencies in order to improve and co-ordinate services. A pooled budget is established to which each partner contributes. The aim of the partnership is to provide a service to a target client group and allows the organisations to work in a more unified way.

The council has entered into three such arrangements with the Milton Keynes Primary Care Trust (PCT). Integrated Community Equipment Service (ICES) The Integrated Community Equipment pooled budget brings together health and social care equipment for disabled people as a single service, with some efficiency of scale and improved delivery. The council’s share of income and expenditure is included within the Comprehensive Income and Expenditure Statement. The table below summarises the financial performance of the scheme:

2010/11 Integrated Community Equipment Service (ICES) 2011/12£'000 £'000

Gross Funding(181) Milton Keynes Council (181)(252) Milton Keynes Primary Care Trust (252)

(433) Total Funding (433)

452 Expenditure 713

452 Total Expenditure 713

19 Net (Surplus)/Deficit 280

(8) MKC share of underspend/ (overspend) (117)(11) PCT share of underspend/ (overspend) (163)

0 Net Deficit Carried Forward 0


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Mental Health The Mental Health pooled budget supports the integrated mental health service (council and Primary Care Trust), allowing greater flexibility and economies of scale in funding mental health services. The council’s share of income and expenditure is included within the Comprehensive Income and Expenditure Statement. The table below summarises the financial performance of the scheme:

2010/11 Mental Health 2011/12£'000 £'000

Gross Funding(3,847) Milton Keynes Council (3,842)

(12,985) Milton Keynes Primary Care Trust (12,449)

(16,832) Total Funding (16,291)

Expenditure1,367 Commissioning 16,241

15,483 Provider 0


18 Net Deficit/ (Surplus) before additional contributions / distributions (50)

(4) MKC share of underspend/ (overspend) 12(14) PCT share of underspend/ (overspend) 38

0 Net Surplus carried forward 0


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Learning Disability The Learning Disability pooled budget supports the integrated learning disability service (council and Primary Care Trust), allowing greater flexibility and economies of scale in funding mental health services. Milton Keynes Council is the Lead Partner for the Learning Disability Pool. The council’s share of income and expenditure is included within the Comprehensive Income and Expenditure Statement. The table below summarises the financial performance of the scheme:

2010/11 Learning Disability 2011/12£'000 £'000

Gross Funding(16,885) Milton Keynes Council (18,915)(1,161) Milton Keynes Primary Care Trust (1,161)

(18,046) Total Funding (20,076)

Expenditure135 Senior Management 132430 Team A / Intake and Assessment 426568 T & D, QA & Policy / Training Quality & Review 549277 Team B / Mental Health & Learning Disability 248

4,942 External Residential Care 5,135551 Fremantle 509

1,083 Mathieson Road 1,0732,473 Internal Day Care 2,329

544 External Day Care 639120 Thrift Farm 113164 Home Care 197396 Direct Payments 382621 Peripatetic 648

0 Supporting People 5353,363 External Supported Living 4,730

299 Psychology 290253 Medical Services 254273 Supported Employment 247

1,554 Grants to Voluntary Organisations 1,640


0 Net (Surplus)/Deficit 0


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16. OFFICERS REMUNERATION

The remuneration paid to the council’s senior employees during 2011/12 whose salary is less than £150,000 was as follows:

Total Total2010/11 2011/12

£ £ £ £ £

161,017 Corporate Director, Children & Families 134,318 769 25,655 160,742

147,657 Corporate Director, Community Wellbeing 125,364 0 23,945 149,309

137,895 Corporate Director, Organisational Transformation Programme 118,896 0 22,709 141,605

136,337 Director of Strategy 105,000 180 20,055 125,235

155,473 Corporate Director, Resources 130,338 420 24,895 155,653

Expense AllowancesSalary Pension

Contribution

The remuneration paid to the council’s senior employees during 2011/12 whose salary is more than £150,000 was as follows:

Total Total2010/11 2011/12

£ £ £ £ £184,201 Chief Executive - D Hill 154,218 344 29,456 184,018

Salary Expense Allowances

Pension Contribution

The council’s other employees (excluding those listed individually as senior employees) receiving more than £50,000 remuneration for the year (excluding employer’s pension contributions) were paid the following amounts:

Restated2010/11 2011/12 2011/12

£ BandNumber of Employees

Number of Employees

No of Redundancies

£50,000 - £54,999 75 52 2£55,000 - £59,999 54 50 1£60,000 - £64,999 28 29 0£65,000 - £69,999 18 17 1£70,000 - £74,999 15 9 0£75,000 - £79,999 10 11 1£80,000 - £84,999 4 5 0£85,000 - £89,999 6 4 1£90,000 - £94,999 1 0 0£95,000 - £99,999 1 0 0£100,000 - £104,999 0 0 0£105,000 - £109,999 0 0 0£110,000 - £114,999 0 0 0£115,000 - £119,999 0 0 0£120,000 - £124,999 0 0 0£125,000 - £129,999 0 0 0

212 177 6


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In previous years Foundations Schools and Voluntary Aided schools employees were included in the above disclosure. The employees of these schools are formally employed by the Governors of the school and not controlled by Milton Keynes Council, for this reason the employees of these schools receiving more the £50,000 remuneration for the year have been excluded in 2011/12 disclosure and the 2010/11 comparators has been restated. The number of exit packages with total costs per band and total costs of the compulsory and other redundancies are set out in the table below:

(a)Exit package cost band (including special payments)

2010/11 2011/12 2010/11 2011/12 2010/11 2011/12 2010/11 2011/12

£0 - £20,000 36 19 12 38 48 57 300 583£20,001 - £40,000 5 1 0 14 5 15 133 467£40,001 - £60,000 2 2 0 4 2 6 100 271£60,001 - £100,000 1 2 1 6 2 8 159 569£100,001 - £250,000 0 0 0 4 0 4 0 553

Total Exit packages charged to the Comprehensive Income & Expenditure Statement 44 24 13 66 57 90 692 2,443

Total number of exit packages in each

band [(b) + (c)]

Total Cost of exit package in each

band

(b) (c) (d) (e)Number of

Compulsory redundancies

Number of other departures

agreed

The total cost of £2,443,000 in the table includes exit packages that have been agreed, accrued for and charged to the authority’s Comprehensive Income and Expenditure Statement in the current year.


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17. DEDICATED SCHOOLS GRANT

The council’s expenditure on schools is funded primarily by and the Dedicated Schools Grant (DSG provided by the Department for Education (DfE). DSG is ring-fenced and can only be applied to meet expenditure properly included in the Schools Budget, as defined in the School Finance (England) Regulations 2011 and the School Finance (England) Regulations 2012. The Schools Budget includes elements for a range of educational services provided on an council-wide basis and for the Individual Schools Budget (ISB), which is divided into a budget share for each maintained school. When a school is granted Academy Status by the DfE, the amount of DSG allocated to the council is reduced by that school’s budget share reflecting the period of the financial year remaining. The DfE state that “the overarching principle of academy funding is that academies should be funded on the same basis as local maintained schools. Local Authority Central Spend Equivalent Grant (LACSEG) is paid to academies to cover the costs of services that the local authority provides to maintained schools because academies are expected to secure these services independently”. The table below shows the deployment of the DSG receivable for 2011/12.

Central Expenditure ISB Total

£'000 £'000 £'000Final DSG for 2011/12 179,672

Exceptional Circumstances Grant Awarded In year (722)

Surplus Brought forward from 2010/11 2,275

Carry forward to 2012/13 Agreed in Advance (805)

Agreed Budgeted distribution of DSG in 2011/12 14,179 166,241 180,420Actual Central Expenditure (excluding funds devolved/delegated to schools in year) 9,160

Actual ISB deployed to Schools (after allocation of contingencies etc from Central Expenditure Budgets delegated/devolved to schools in year)

147,007

Balance of Diploma Grant 25

Local Authority Contribution for 2011/12 0 13 13

In year reduction in ISB for schools becoming Academies (20,870) (20,870)

In year reduction in DSG for schools becoming Academies 21,062

DSG Carry Forward to 2012/13 5,044 (1,623) 4,034


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18. GRANT INCOME

The council has been credited with the following grants and contributions in the Comprehensive Income and Expenditure Statements during 2011/12. The council has received a number of grants, contributions and donations that have yet to be recognised as income as they have conditions attached to them that will require the monies or property to be returned to the awarding body. The balances at the year end are as follows:

2010/11 2011/12£'000 Credited to Taxation and Non Specific Grant Income £'000

(11,069) Revenue Support Grant (20,894)0 Early Intervention Grant (10,219)0 Council Tax Freeze Grant (2,313)0 Local Services Grant (772)0 Learning Disability & Health Reform Grant (3,307)

(481) Local Authority Business Growth Incentive Grant 0(14,374) Area Based Grant 0(25,924) Total Non-Ringfenced Government Grants (37,505)(98,248) Council Tax Income (98,599)(76,225) Redistributed National Non-Domestic Rate Income (67,596)(30,497) Capital Grants and Contributions (27,166)

(230,894) (230,866)Credited to Services

Grants:(159,803) Dedicated Schools Grant (158,636)(64,557) Mandatory Rent Allowance: Subsidy (67,180)(25,461) Mandatory Rent Rebates (26,924)(17,134) Council Tax Benefit (17,089)(17,069) Young People's Learning Agency (9,350)

0 New Homes Bonus (2,873)0 NHS Support for Social Care (2,385)0 Pupil Premium Grant (2,235)

(2,319) Benefits Administration Grant (2,176)(799) Adult and Community Learning (1,328)

0 Devolved Capital grant (829)(578) Unaccompanied Asylum Seeking Children (715)

0 Exceptional Services Grant (516)(731) Youth Justice Board (416)(159) CWDC Social Work Programme (400)(370) NNDR Administration Grant (372)(52) Music Services Grant (361)

(17,678) Standards Fund 0(8,580) Education Special Grants (Schools Standards Grant) 0(7,880) General Sure Start Grant 0(5,335) 16-18 Learner Responsive 0(1,011) Growth Fund Revenue 0(1,087) Quality & Access Grants 0(7,957) Other Grant Income (2,058)

Contributions:(8,190) Social Care Client Contributions (9,050)(6,546) Primary Care Trust Contributions (3,454)(2,386) Milton Keynes Hospital NHS Foundation Trust Contributions (2,669)(5,952) Other Contributions (5,540)

(361,634) Total Grant Income credited to Cost of Services (316,556)

Total Credited to Taxation and Non Specific Grant Income


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Current Liabilities

2010/11 2011/12£'000 £'000

Grants and Contributions Receipts in Advance (Capital)Grants:

(1,475) Low Carbon Infrastructure Grant (1,469)0 Green Bus Fund Grant (640)0 Plugged in Places Funding Grant (35)

(51) IT Infrastructure Grant (31)0 English Heritage Lottery Grant (39)

(647) Other Grants (24)Contributions:

(2,884) Homes and Community Agency Contributions (3,900)0 MKC School Journey Premium Income Contributions (348)

(425) Other Contributions (13)(5,482) (6,499)

Grants and Contributions Receipts in Advance (Revenue)Grants:

(2,275) Dedicated Schools Grant (4,035)0 NHS Support for Social Care (1,571)

(1,399) Standards Fund 0(937) Housing Planning Delivery Grant (644)(580) English Partnership (504)(547) Pothole Funding 0(792) Social Care Reform Grant (370)(115) CWDC Social Work Programme (328)

0 Egov4u (183)(134) EEA Public Art (190)(118) Homelessness Grant (118)

0 Asylum Seekers Grant (11)(1,173) Other Grants (789)

Contributions:(771) Developer Contributions (895)

(1,026) Other Contributions (1,045)

(9,867) Total Grants and Contributions Receipts in Advance (Revenue) (10,683)

Total Grants and contributions Receipts in Advance (Capital)

Long Term Liabilities:

2010/11 2011/12£'000 £'000

Grants and Contributions Receipts in Advance (Capital)Grants:

0 Short Breaks Grant (145)0 Westcroft District Park (49)

(345) Local Authority Business Growth Incentive (LABGI) 0(544) Other Grants (20)

Contributions(231) Other Contributions (124)

0 Donated Asset - MRF (357)(1,120) (695)

Grants and Contributions Receipts in Advance (Revenue)(19,141) Developer Contributions (21,497)(19,141) Total Grants and Contributions Receipts in Advance (Revenue) (21,497)

Total Grants and Contributions Receipts in Advance (Capital)


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19. LANDFILL ALLOWANCE TRADING SCHEME

The Waste and Emissions Trading Act 2003 places a duty on waste disposal authorities to reduce the amount of biodegradable municipal waste (BMW) disposed to landfill. From 1st April 2005 it introduced a trading scheme, which allocates tradable landfill allowances. The figures below are shown as current assets and current liabilities in the Balance Sheet. Each year the figures are based on estimated usage for the final quarter of the year. The opening balance has been adjusted to reflect the final position for the previous year.

Tonnes £'000 Tonnes £'000

7,023 84 Opening Balance at 1st April (5,294) (66)

8,000 69 Purchases 10/11 Allowances 0 0

(7,746) (77) Adjustment to opening balance to reflect audited final tonnages and value for previous years 2,253 28

7,277 76 Adjusted opening balance (3,041) (38)

(7,277) (76) Revaluation of LATS 3,041 38

(39,772) (497) Allowances Received (34,790) (249)

0 0 Purchases 0 0

0 0 Sales 0 0

34,478 431 Allowances Used 28,318 203

0 0 Allowances written off 0 0

(5,294) (66) Balance at 31st March (6,472) (46)

2010/11 2011/12

20. PROPERY, PLANT AND EQUIPMENT

The tables on the following pages show the movements in year for property, plant and equipment in 2011/12 and the 2010/11 comparative movement.


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Movement in 2011/12

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Cost or Valuation £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 April 2011 435,314 450,557 4,649 14,825 136,541 266 8,058 18,079 1,068,289Additions 9,766 865 23 1,327 8,384 70 0 8,622 29,057Donations 0 0 0 357 0 0 0 0 357Revaluation recognised in the Revaluation Reserve (585) (10,926) 0 0 0 0 (24) 0 (11,535)Revaluation recognised in the Surplus/Deficit on the Provision of Services (14,630) (6,601) 0 0 0 0 (30) 0 (21,261)

Derecognition - disposals (790) (64) 0 0 0 0 (495) 0 (1,349)Derecognition - other 0 (9,460) (158) (1,146) 0 0 0 0 (10,764)Assets Reclassified (to)/from Held for Sale 0 (26) 0 0 0 0 (55) 0 (81)Assets Reclassified (to)/from Other asset classes 1,151 13,044 0 801 18 1,322 (59) (16,282) (5)Other Movements in cost or valuation 0 0 0 0 0 0 0 0 0At 31 March 2012 430,226 437,389 4,514 16,164 144,943 1,658 7,395 10,419 1,052,708Accumulated Depreciation and ImpairmentDepreciation value at 1 April 2011 0 (23,196) (1,930) (7,222) (24,395) 0 (67) 0 (56,810)Impairment value at 1 April 2011 (8,703) (26,519) 0 (117) 0 0 (2,818) 0 (38,157)Depreciation charge (6,421) (9,344) (778) (1,720) (3,498) 0 (92) 0 (21,853)Depreciation written out to the Revaluation Reserve 0 16,578 0 0 0 0 27 0 16,605Depreciation written out to the Surplus/Deficit on the Provision of Services 6,459 371 0 0 0 0 0 0 6,830

Impairment losses/(reversals) recognised in the Revaluation Reserve (79) 6,337 0 0 0 0 (67) 0 6,191Impairment losses/(reversals) recognised in the Surplus/Deficit on the provision of Services

(9,015) (4,712) 0 (30) 0 0 (785) 0 (14,542)

Derecognition - disposals 28 8 0 0 0 0 19 0 55Derecognition - other 0 2,253 158 1,136 0 0 0 0 3,547Assets Reclassified (to)/from Other asset classes (66) 109 0 43 0 0 (74) 0 12Other movements in depreciation and impairment 0 0 0 0 0 0 0 0 0At 31 March 2012 (17,797) (38,115) (2,550) (7,910) (27,893) 0 (3,857) 0 (98,122)Net Book Valueas at 31 March 2012 412,429 399,274 1,964 8,254 117,050 1,658 3,538 10,419 954,586as at 31 March 2011 426,611 400,842 2,719 7,486 112,146 266 5,173 18,079 973,322


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2010/11 Comparators

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Cost or Valuation £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000At 1 April 2010 569,951 439,087 4,712 12,871 124,441 266 5,685 23,109 1,180,122Additions 12,229 3,500 236 1,970 12,100 0 0 17,844 47,879Donations 0 0 0 0 0 0 0 0 0Revaluation recognised in the Revaluation Reserve 0 5,193 0 0 0 0 1,297 0 6,490Revaluation recognised in the Surplus/Deficit on the Provision of Services (145,359) (1,259) 0 0 0 0 (26) 0 (146,644)

Derecognition - disposals (943) (1,152) 0 (76) 0 0 0 0 (2,171)Derecognition - other 0 (3,338) (299) 0 0 0 0 0 (3,637)Assets Reclassified (to)/from Held for Sale 0 (294) 0 0 0 0 414 0 120Assets Reclassified (to)/from Other asset classes (564) 18,876 0 60 0 0 688 (18,939) 121Other Movements in cost or valuation 0 (10,056) 0 0 0 0 0 (3,935) (13,991)At 31 March 2011 435,314 450,557 4,649 14,825 136,541 266 8,058 18,079 1,068,289Accumulated Depreciation and ImpairmentDepreciation value at 1 April 2010 0 (16,269) (1,371) (5,701) (21,205) 0 (27) 0 (44,573)Impairment value at 1 April 2010 (11,678) (12,061) 0 (102) 0 0 (2,193) 0 (26,034)Depreciation charge (7,897) (8,669) (858) (1,595) (3,190) 0 (39) 0 (22,248)Depreciation written out to the Revaluation Reserve 0 955 0 0 0 0 0 0 955Depreciation written out to the Surplus/Deficit on the Provision of Services 7,897 102 0 0 0 0 0 0 7,999

Impairment losses/(reversals) recognised in the Revaluation Reserve 0 (1,762) 0 0 0 0 (625) 0 (2,387)Impairment losses/(reversals) recognised in the Surplus/Deficit on the provision of Services

2,975 (13,165) 0 (15) 0 0 0 0 (10,205)

Derecognition - disposals 0 83 0 74 0 0 0 0 157Derecognition - other 0 621 299 0 0 0 0 0 920Assets Reclassified (to)/from Other asset classes 0 1 0 0 0 0 (1) 0 0Other movements in depreciation and impairment 0 449 0 0 0 0 0 0 449At 31 March 2011 (8,703) (49,715) (1,930) (7,339) (24,395) 0 (2,885) 0 (94,967)Net Book Valueas at 31 March 2011 426,611 400,842 2,719 7,486 112,146 266 5,173 18,079 973,322as at 31 March 2010 558,273 410,758 3,341 7,069 103,236 266 3,466 23,109 1,109,518


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Depreciation Depreciation should be provided on all assets with a finite useful life, which can be determined at the time of acquisition or revaluation. The table below details the different classes of asset held by the council, the useful lives of each class of asset and the total depreciation charged for the year.

2010/11 Potential ActualDepreciation Useful Life Useful Life General

Charge of Asset of Asset Fund HRA TotalYears Years £'000 £'000 £'000

7,897 Council Dwellings 10 - 85 * 10 - 85 * 0 6,421 6,4218,708 Other Properties 20 - 60 ** 20 - 60 ** 8,841 595 9,436

1,595 Vehicles, Plant and Equipment 3 - 40 *** 3 - 18 1,592 128 1,720

858 Leased VPE 3 - 40 *** 3 - 10 778 0 778Infrastructure 40 40Infrastructure - Other 20 20

22,248 14,709 7,144 21,853

3,190

2011/12 Depreciation Charge

3,498 0 3,498

* The depreciation for Right to Buy Council Dwellings is based on actual useful lives. ** The depreciation calculation for Other Properties is based on a 60 year life from the completion date. Each time an asset is revalued the asset life is revised, but the calculation is based on the date of completion, a life of 60 years and the revaluation date. *** The useful life varies from 3 to 40 years depending on the estimated life of each asset. Please see Accounting Policy note 25 for further details. Capital Commitments The council prepares an annual capital programme but a number of schemes take several years to complete thus committing the authority to capital expenditure in future years. Overall commitments at 31st March 2012, including those with a commitment of less than £100,000, totalled £10,500,000. There are contractual commitments for the acquisition of purchased intangible assets of £42,000. Capital Commitments resulting in expenditure for foundation schools will be treated as Revenue Expenditure Funded from Capital under Statute (REFCUS) because it will not result in an asset for the council.


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Contractual commitments as at 31st March 2012 with a commitment of £100,000 or more are shown in the table below.

Segment: Scheme Name Scheme Description 2011/12Period of

Investments£'000 Years

Queen Eleanor Primary School Roofing Works 197 1WCP Langlands Primary School School Extension 542 1

739Resources - Public AccessSaxon Court Roofing works. 231 1Desktop Virtualisation Computer Equipment 106

337

Wolverton Station Railway Station and facilities 189 1Station Approach Realm and facility Improvements 460 1Quality Bus Information Bus Shelters 146 1

795Housing and Community GroupStructural Structural Improvements 161 1Windows Window Improvements 158 1

319Community Facilities UnitWolverton Swimming Pool New swimming pool and facilities 4,946 2Broughton Pavilion Community Pavilion 1,900 1Conniborrow Project Community facility - Baseball diamond 275 1

7,121

Grand Total 9,311

Children & Families

Highways and Transportation

Valuation of Non-Current Assets The council has a five year rolling programme for undertaking valuations of its property assets. In the 2011 valuations all those properties not valued within the previous five years, excluding Council Dwellings, were valued by Lorna Kempster MRICS, Nathan Andrews MRICS and Richard Jenden MRICS of Mouchel Business Services Ltd, the appointed external valuers. The valuation date was 1st April 2011. A property review has also been undertaken of the council’s entire property portfolio, excluding Council Dwellings, as at 31st March 2012. These valuations were completed by Nathan Andrews MRICS and Lorna Kempster MRICS of Mouchel Business Services Ltd. Following research into levels of land values during 2011/12, the conclusion of this review is that there has been no further decrease in land values since March / April 2011.

An enhancement review has been undertaken and where appropriate, revaluations have been conducted as at 31st March 2012. This has also resulted in specific impairment losses being identified on a number of assets as shown in the impairment disclosures later in this section.


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The valuations were prepared in accordance with the Practice Statements in the RICS Red Book 2012, published by the Royal Institution of Chartered Surveyors and the valuation procedures agreed between RICS and CIPFA based on the International Financial Reporting Standards referred to in the RICS Red Book 2012. In accordance with the relaxations agreed between the RICS and CIPFA, not all properties were inspected. The significant assumptions applied in estimating the fair values are:-

• That there are no burdensome incidents of tenure, legal rights, restrictive covenants, charges or outgoings, and no encumbrances on title affecting the properties;

• That the properties are in good structural repair; • Unless valuers are otherwise aware, that the properties are in a reasonable

standard of repair and that all reasonable external and internal repair and maintenance has been carried out;

• That the properties are free from the presence of any deleterious or hazardous material;

• That no contaminative or potentially contaminative uses have ever been carried out on the property and that no radon gas is present at any of the premises.

Council Dwellings have been valued as at 1st April 2011 based on a desk top review and a further property review has been undertaken as at 31st March 2012. Council dwellings were valued by Peter Riley FRICS of Mouchel Business Services Ltd in accordance with DCLG 2010 Guidance on Stock Valuation and the Royal Institution of Chartered Surveyors Appraisal and Valuation Standards. A HRA Capital Programme impairment loss has also been incurred at 31st March 2012 and some of the previous year’s Capital Programme has been reversed. This is following the capital expenditure incurred in year and subsequent 31st March revaluations as shown in the impairment disclosure in note 20. Assets which transferred to the council from the Homes and Communities Agency are subject to ‘clawback’ on disposal: compensation in respect of transferred asset value. In 2011/12 the council paid £1,070,943 in clawback on housing stock sales of £1,651,550. As at 31st March 2012 60.09% of the council’s housing stock and 3.95% of the non-housing stock are subject to clawback.


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Revaluation of non-current assets

The following table shows the progress of the council’s rolling programme for revaluation of Property, Plant and Equipment:

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Assets held at historical cost 0 0 10,218 117,050 1,658 0 10,419 139,345

Revalued Assets in:

2011/12 412,429 200,149 0 0 0 3,538 0 616,1162010/11 0 32,287 0 0 0 0 0 32,2872009/10 0 54,214 0 0 0 0 0 54,2142008/09 0 52,954 0 0 0 0 0 52,9542007/08 0 59,670 0 0 0 0 0 59,670

Total Valuation of Revalued Assets 412,429 399,274 0 0 0 3,538 0 815,241

The Carrying amount for revalued assets had they been carried under the cost model 412,429 297,598 0 0 0 3,037 0 713,064

Revaluation surplus for revalued assets including the charge in year 0 101,676 0 0 0 501 0 102,177

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Foundation School Asset Values Under the Schools Standards and Framework Act 1998, Foundation Schools Assets are vested in the Governing Bodies of the individual foundation schools. Two schools were transferred to foundation status in year and 7 foundation schools have now become academies. The values for these assets were not consolidated in the council’s Balance Sheet. At 31st March 2012, there were fourteen foundation or trust schools with an estimated asset valuation of £131,359,000 (nineteen schools at £252,590,000 as at 31st March 2011). Effects of Changes in Estimates During the revaluation of the Council’s Right to Buy dwellings, the actual useful lives were critically reviewed. As a result, the depreciation was calculated on an actual life basis instead of in relation to the following categories – less than 20 years, 20 to 50 years and more than 50 years. The annual depreciation charge for the council dwellings of £6,342,000 for 2011/12 was £115,000 higher than it would have been if the categories of lives had been used for this calculation. The impact of this change will carry forward in to 2012/13 and future years.


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Impairment An impairment loss on a re-valued asset is the amount by which the carrying amount of an asset exceeds its recoverable amount. This can be due to the consumption of economic benefit or due to a fall in prices that is specific to an asset. The loss is recognised in the Revaluation Reserve to the extent that the impairment does not exceed the amount in the Revaluation Reserve for that asset and thereafter in the Surplus or Deficit on the Provision of Services. An impairment loss on a non re-valued asset (those held at historic cost) is recognised in the Surplus or Deficit on the Provision of Services.

At the end of each reporting period if there is an indication that an impairment loss, previously recognised in the Surplus or Deficit on the Provision of Services, may no longer exist or may have decreased, the reversal of that loss is permitted if there has been a change in the estimates used to determine the asset's recoverable amount since the impairment loss was recognised. The following table shows the impairment charges for non-current assets in 2011/12:

General Fund HRA General

Fund HRA

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Property Plant and EquipmentCouncil Dwellings 79 0 17,718 0 0 (8,703) 79 9,015Other Land & Buildings 4,968 7,813 0 (11,305) (3,101) 0 (6,337) 4,712Vehicles, Plant & Equipment 0 30 0 0 0 0 0 30Leased Vehicles, Plant & Equipment 0 0 0 0 0 0 0 0Infrastructure 0 0 0 0 0 0 0 0Community Assets 0 0 0 0 0 0 0 0Surplus Assets 68 0 786 (1) 0 (1) 67 785

5,115 7,843 18,504 (11,306) (3,101) (8,704) (6,191) 14,542

Investment Assets 0 0 0 0 0 0 0 0Assets Held for Sale 29 0 0 (9) 0 0 20 0Total Impairment 5,144 7,843 18,504 (11,315) (3,101) (8,704) (6,171) 14,542

Impairment Loss Reversal of Impairment LossTotal to

Revaluation Reserve

Service Total

Taken to Revaluation

Reserve

Charged to Services Taken to

Revaluation Reserve

Previously Charged to Service

Total Property Plant and Equipment


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Material Impairment Losses During 2011/12, the council has recognised material impairment losses totalling £24,848,000 in relation to Council Dwellings and three other Land and Building assets. The council also reversed a material impairment loss of £1,697,000 in relation to the 2011/12 Capital Programme. Further detail can be found in the table below:

Assets

Material Impairment

Loss - Recognised in

year£'000

Material Impairment

Loss - Reversed in

year£'000

Events/Circumstances

Housing Revenue Account

Council Dwellings 17,797 0Recognising the works identified for the HRA 2012/13 Capital Programme including the Government's Communty Energy Savings Programme (CESP)

Council Dwellings 0 (1,697)Reversing part of the impairment loss recognised in the previous year relating to the 2011/12 Capital Programme following revaluations.

Children & Families - Education, Effectiveness & ParticipationRickley Park Primary School 1,666 0 Demolition of school building as part of the

redevelopment of the school facilities

Rickley Park Primary School - new building 3,126 0

A decline in value specific to the asset due to project costs to bring the asset into use being greater than its value (Depreciated Replacement Cost (DRC))

Compliance Unit

Crownhill Crematorium - new facility 2,259 0

A decline in value specific to the asset due to project costs to bring the asset into use being greater than its value (Depreciated Replacement Cost (DRC))

Total 24,848 (1,697)


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21. HERITAGE ASSETS

The table below shows the reconciliation of the carrying value of Heritage Assets held by the authority:

Historical Buildings & Archaeolog-

ical Sites

Museum & Archive

CollectionsArts

CollectionCivic

Insignia Total AssetsCost or Valuation £'000 £'000 £'000 £'000 £'000At 1 April 2010 0 0 0 0 0

At 31 March 2011 0 0 0 0 0

Cost or ValuationAt 1 April 2011 0 0 0 0 0Additions 12 0 0 0 12Disposals 0 0 0 0 0Revaluations 0 0 0 0 0Impairment losses/(reversals) recognised in the Revaluation Reserve

0 0 0 0 0

Impairment losses/(reversals) recognised in the Surplus/Deficit on the Provision of Services

0 0 0 0 0

Depreciation 0 0 0 0 0

At 31 March 2012 12 0 0 0 12 Historical Buildings and Archaeological Sites Heritage assets acquired or constructed in 2011/12 are recognised and measured (including the treatment of revaluation gains and losses) in accordance with the council’s accounting policy on Property, Plant and Equipment. Insurance valuations are considered to establish whether their application would be appropriate and also whether a market value exists for each asset. The council undertakes a valuation where the information is available and appropriate. In most cases the council does not consider that comparable market value information can be obtained for historical buildings and archaeological sites or that insurance valuations can be used in order for values to be established. This is because of the nature of the assets held. Museum and Archive Collections The council’s Museum and Archive collections are not recognised in the Balance Sheet as the council does not consider that reliable cost or valuation information can be obtained and that the cost of obtaining the information outweighs the benefits to the users of the financial statements. This is due to the diverse nature of the assets held and the lack of comparable market values.


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Insurance information is available for two significant items within the collection - a Bronze Age sword and an inchthysaur fossil. Arts Collection Reliable cost or valuation information is not readily available, and the council believes that obtaining valuations for these items requires significant investment and currently the cost is prohibitive. However, the council acknowledges the need for a valuation review and plans are in place to undertake this work in the future. Consequently the council does not recognise these assets on the Balance Sheet this financial year but wishes to do so in future years. A condition survey and valuation of public art was undertaken in 1991 and 1996 and these are the last known dates at which items in the collection were valued. Where no value is given this means they were not valued at this time and artworks acquired after this date have not been independently valued. Insurance valuation information is available for a global sum covering all the public art works but not on an itemised basis. Civic Insignia The last valuation of civic insignia assets was undertaken in 2006. Reliable cost or current valuation information is not readily available and the council believes that the cost involved in obtaining this information is not commensurate with the benefits to the users of the financial statements. Consequently the council does not recognise these assets on the Balance Sheet. Insurance information is available for a global sum covering all civic insignia but not on an itemised basis. Heritage Assets - Five Year Summary of Transactions The Heritage Assets included in the Balance Sheet at 31st March 2012 were brought in as additions during the year. Prior to their addition, and for the reasons explained above, there were no balances or transactions in respect of Heritage Assets included within the financial statements. For this reason, the table which provides details of the transactions of five years has been omitted but will be included from 2012/13 inwards. Heritage Assets – Further Information on Assets Held Historical Buildings & Archaeological Sites The council owns a variety of Historical Buildings and Archaeological Sites. Many of these are ‘Designated Heritage Assets’ e.g. scheduled ancient monuments, listed buildings or assets within conservation areas and are of national significance. In addition to this, there are others that are ‘Non-Designated Heritage Assets’, i.e. those which have a degree of


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significance meriting consideration in planning decisions but are of local significance rather than national. The nature, scale and significance of these assets is not confined to a particular type or size and incorporates a range of listed buildings. Scheduled ancient monuments also involve a similarly broad range, including public infrastructure such as road bridges. The council adheres to the generic acquisition and disposal policies contained within section 11 of its Property Strategy and there is no specific policy for the preservation or management of historical buildings and archaeological sites. However, the council’s Conservation & Archaeology Team has begun work on its borough wide Heritage at Risk Register. Alongside privately owned buildings, this identifies assets owned by Milton Keynes Council. There are currently eight council owned assets identified on this register. The draft register of council owned buildings has been presented to the Strategic Property Group within the council. It is hoped that as the register is formalised, it will provide a basis for the council to enter into responsible short term management of these assets and to examine how the long term preservation of each building is best secured. Historical Buildings and Archaeological Sites are assessed by the Property Services Department with regards to meeting the CIPFA Code of Practice definition of Heritage Assets and Donated Assets. The council does not have any significant historical buildings or archaeological sites which it can verify as being donated. Museum and Archive Collections The museum collection consists of just less than 5,000 items and relates to the history of Milton Keynes from the pre-historic period to the present day. Within those collections lie significant items of archaeological material (metal, pottery, stone, etc) that form part of the site information record connected to the building and development of the New Town. The collection also includes environmental and natural history, social, industrial and domestic life, and art, particularly art from the artists in residence during the New Town period. The Museum collection is held at Buckinghamshire’s County Museum. The council also administers the Milton Keynes Council and Development Corporation Archives which equate to 140 cubic metres of shelving. The Archive collection consists of deposited council and predecessor collections (borough, district, urban, etc) that inform about the governance of the area, plus historic material relating to land and property, family, estate, ecclesiastical, court, business and charity holdings, and personal deposits. Together this constitutes a rich archival history of the area. In addition the archive holds the records of the Commission for New Towns/Milton Keynes Development Corporation and its successors which details the planning, building and development of the New Town. This archive is of national if not international significance and includes substantial audio-visual record material. The archives are held at the Centre for Buckinghamshire Studies, Aylesbury, which collects, catalogues and preserves them and provides public access. The Council currently adheres to the Collecting Policies of Buckinghamshire


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County Museum and the Centre for Buckinghamshire Studies (County Archives) who collect on the council’s behalf. Museum objects are usually donated and information is held at the Buckinghamshire County Museum. Archive material is generally deposited, not donated and relevant data is held on accession registers. There are no known significant donations of heritage assets in the Museum Collection. Milton Keynes Council has an arrangement with Bucks County Council for the latter to deliver its heritage (archive and museums) provision. This has been in place since 1997 when Milton Keynes Council attained unitary status and is renewed every 3 – 5 years dependent on the requirements of the service. The last full review was in 2007-08 and the current arrangement is to run until March 2014. Monitoring in undertaken on a quarterly basis to meet the financial performance data needs of Milton Keynes Council and to enable greater flexibility and reactivity as needs arise. Arts Collection The Public Art Collection consists of approximately 100 items of works of art. The collection includes sculptures, paintings, prints and artists designs integrated in public spaces and buildings. The collection has grown with the development of the city and many of the artworks help map the story of Milton Keynes and contribute to its cultural life. There are some important artworks and artists represented in the collection such as the Black Horse by Elisabeth Frink. Also there are some artworks that have emerged through socially engaged practices such as the Tin Man concrete sculpture. In the main, this is a collection that is permanently on display in public places. The council has a public art policy for commissioning, but does not have a specific public art collections policy. The need for a policy is recognised in the Milton Keynes Public Art Strategy and plans to develop one are in place. The public art collection forms part of the city heritage collection and as such a shared policy should be applied for collections, decommissioning and disposals. The Council does not have any items in its collection which it can verify as being donated. Civic Insignia The council’s Mayoral Insignia comprises assets which are pertinent to the council’s position as a Borough, i.e. chains of office for the Mayor, Deputy Mayor Consort and respective consorts. The council does not have a policy on acquisition and has no plans to dispose of any civic insignia assets. The council does not have any items in its insignia collection which it can verify as being donated.


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Heritage Assets – Change In Accounting Policy The Code of Practice on Local Authority Accounting in the United Kingdom 2011/12 introduced a change to the treatment in accounting for heritage assets held by the council. Heritage assets are recognised as a separate class of assets for the first time in the 2011/12 financial statements. Previously, heritage assets were either recognised as community assets (at cost) in the Property, Plant and Equipment classification in the Balance Sheet at nil value or were not recognised in the Balance Sheet as it was not possible to obtain cost information on the assets. The council’s accounting policies for recognition and measurement of Heritage Assets are set out in the council’s summary of significant accounting policies. In applying the new accounting policy, the council has identified that two assets which were previously held as community assets within Property, Plant and Equipment at nil value should now be recognised as Heritage Assets. In 2011/12 the Council has recognised an addition in the Balance Sheet for further Heritage Assets on a depreciated historic cost measurement basis for the amount of £12,408. For assets held prior to 2011/12, there is a lack of reliable cost or valuation information available and the cost of obtaining the information outweighs the benefits to the users of the financial statements. These heritage assets are therefore not recognised in the Balance Sheet and as such, there is no effect on the opening Balance Sheet at 1st April 2010 and no transactions relating to Heritage Assets in the financial statements for 2010/11. 22. INVESTMENT PROPERTIES

The council does not have property interests held under operating leases which are classified or accounted for as investment property. The following items of income have been accounted for in the Comprehensive Income and Expenditure Statement. There are no material direct operating expenses arising from investment property.

2010/11 2011/12£'000 £'000

60 60

0 0

60 Net gain/(loss) 60

Rental income from investment property

Direct operating expenses arising from investment property


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Some investment properties are subject to Government consent for sale and a proportion of the proceeds paid to the Housing and Communities Agency. Other investment properties have restrictions not related to the consent / clawback referred to above and others are free from significant restrictions. Some investment assets will be subject to contractual obligations in relation to future development. Investment assets leased out on either Full Repairing and Insuring Leases or on Ground Leases will not incur significant contractual expenditure.

The following table summarises the movement in the fair value of investment properties over the year.

2010/11 2011/12£'000 £'000

20,253 Balance at start of the year 20,132

Additions:0 Purchases 00 Construction 00 Subsequent expenditure 0

0 Disposals 0

0 Net gains/(losses) from fair value adjustments 151

Transfers:0 (To)/from Inventories 0

(121) (To)/from Property, Plant and Equipment 0

0 Other changes 0

20,132 Balance at the end of the year 20,283


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23. CAPITAL EXPENDITURE AND CAPITAL FINANCING The total amount of capital expenditure incurred in the year is shown in the table below (including the value of assets acquired under finance leases and PFI/PPP contracts), together with the resources that have been used to finance it. Where capital expenditure is to be financed in future years by charges to revenue as assets are used by the authority, the expenditure results in an increase in the Capital Financing Requirement (CFR), a measure of the capital expenditure incurred historically by the authority that has yet to be financed. The CFR is analysed in the second part of this note.

Restated2010/11 2011/12

£'000 £'000332,162 Opening Capital Financing Requirement 345,893

Capital Investment47,879 Property, Plant & Equipment 29,057

0 Investment Properties 0 0 Heritage Assets 12

84 Intangible Assets 6 14,755 Revenue Expenditure Funded from Capital under Statute 5,981

62,718 Total 35,056

Sources of Finance1,660 Capital Receipts 6,683

14,956 Supported Borrowing 4,242 4,037 Prudential Borrowing (4,941)

236 Lease Finance 23 4,897 Major Repairs Allowance 8,092

32,787 Other Government Grants & Contributions 19,118 4,145 Revenue Contributions 1,839

62,718 Total 35,056 Capital Financing Requirement

262,923 Non-HRA Capital Financing Requirement 249,349 82,970 HRA Capital Financing Requirement 253,983

345,893 Total 503,332

Explanation of movements in year

4,299 Increase in underlying need to borrowing (supported by government financial assistance) 157,742

9,196 Increase in underlying need to borrowing (unsupported by government financial assistance) (326)

236 New Assets Acquired under Finance Leases 23

0 New Assets Acquired under PFI/PPP Contracts 0

13,731 Increase/Decrease in Capital Financing Requirement 157,439 24. INTANGIBLE ASSETS

The council accounts for its software as intangible assets, to the extent that the software is not an integral part of a particular IT system and accounted for as part of the hardware


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item of Property, Plant and Equipment. The intangible assets include purchased software licenses and an embedded lease. The council does not hold any internally generated intangible assets. All software is given a finite useful life, based on assessments of the period that the software is expected to be of use to the council. The useful lives assigned to each class of intangible asset are:

Internally Generated Assets

Other Assets Purchased

Other Assets Leased

Useful Life None 3 years 12 years The council uses the carrying amount of intangible assets to amortise on a straight line basis rather than the re-valued amount. The amortisation for 2011/12 was £717,000 which was charged to the Cost of Service in the Comprehensive Income and Expenditure Statement. The line items of the statement which contain material amounts of amortisation of intangible assets are Resources: Finance & HR Group £557,000, Children & Families Services £76,000 Resources: Public Access Group £42,000 and HRA £22,000. The movement on Intangible Asset balances during the year is as follows:

Other Assets

Purchased

Other Assets Leased

Total 2010/11

Other Assets

Purchased

Other Assets Leased

Total 2011/12

£'000 £'000 £'000 £'000 £'000 £'000

Balance at start of year 1 April 756 6,686 7,442 Gross carrying amounts 840 6,686 7,526

(323) (3,343) (3,666) Accumulated amortisation (535) (3,900) (4,435)

433 3,343 3,776 305 2,786 3,091

Additions :0 0 0 Internal Development 0 0 0

83 0 83 Purchases 6 0 60 0 0 Acquired through business combinations 0 0 00 0 0 Reclassifications 5 0 5

(211) (557) (768) Amortisation for the period (160) (557) (717)

305 2,786 3,091 156 2,229 2,385

Comprising :

840 6,686 7,526 Gross carrying amounts 851 6,686 7,537(535) (3,900) (4,435) Accumulated amortisation (695) (4,457) (5,152)

305 2,786 3,091 Total 156 2,229 2,385

Net carrying amount at start of year 1 April

Net carrying amount at end of year 31 March

A de-minimus level of £1,000 has been applied to expenditure on intangible assets. The council holds an embedded lease intangible asset which is material to the Financial Statements. The leased intangible asset is for a SAP Computer System and has a carrying


98

amount of £2,229,000 at 31st March 2012. The original costs include £617,000 for a Customer Relationship Management System, £537,000 for Portals and £3,687,000 for Core Applications. The remaining period of amortisation on this asset is four years. There are contractual commitments for the acquisition of purchased Intangible Assets of £42,000 at 31st March 2012. 25. CURRENT ASSETS HELD FOR SALE

The movement of the current assets held for sale in 2011/12 are detailed in the table below:

2010/11 2011/12£'000 £'000

6,669 Balance outstanding at 1st April 907

Assets newly classified as held for sale:

489 Property, Plant and Equipment 3630 Intangible Assets 00 Other Assets/Liabilities in Disposal Groups 0

0 Revaluation losses (4)3 Revaluation Gains 24

(164) Impairment Losses (20)

Asset declassified as held for sale:

(609) Property, Plant and Equipment (294)0 Intangible Assets 00 Other Assets/Liabilities in Disposal Groups 0

(5,481) Assets sold (241)

0 Other Movements (2)

907 Balance outstanding at 31st March 733 26. DEBTORS

Long Term Debtors

31 Mar 2011 31 Mar 2012£'000 £'000

78 Mortgages 50 9 Car Loans 15 2 Home Computer Initiative 1

483 Bodies External to Central Government 831

572 Total 897


99

Short Term Debtors

31 Mar 2011 31 Mar 2012

£'000 £'000Short Term Debtors

6,764 Central Government Bodies 7,623 2,119 Other Local Authorities 2,023

267 NHS Bodies 1,014 0 Public Corporations and Trading Funds 0

15,919 Bodies External to Central Government 9,146 3,901 Council Tax Arrears 3,607

21 NNDR Arrears 33 2,717 Housing Rents 3,814

497 Landfill Allowances Asset Account 249 7 Council Staff Debtors 17

32,212 Total Short Term Debtors 27,526

36,438 Payments in Advance 32,575

68,650 Total Short Term Debtors 60,101 27. WORK IN PROGRESS AND INVENTORIES

Inventories and work in progress comprise:

Bal

ance

out

stan

ding

at

1st

Apr

il 20

10

Purc

hase

s

Rec

ogni

sed

as a

n ex

pens

e in

yea

r

Writ

ten

off b

alan

ces

Rev

ersa

l of w

rite

offs

in

pre

viou

s ye

ars

Bal

ance

out

stan

ding

at

31s

t Mar

ch 2

011

Purc

hase

s

Rec

ogni

sed

as a

n ex

pens

e in

yea

r

Writ

ten

off b

alan

ces

Rev

ersa

l of w

rite

offs

in

pre

viou

s ye

ars

Bal

ance

out

stan

ding

at

31s

t Mar

ch 2

012

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Postage 31 180 (182) 0 0 29 136 (158) 0 0 7

ICES Pool * 26 1 0 0 0 27 12 0 0 0 39

Fuel 26 413 (396) 0 0 43 354 (371) 0 0 26

Main Stores 148 643 (565) 0 0 226 430 (457) 0 0 199

Work in Progress 66 528 (24) (26) 0 544 79 (547) 0 0 76

Total 297 1,765 (1,167) (26) 0 869 1,011 (1,533) 0 0 347 * Integrated Community Equipment Service pooled budget arrangement. See note 15 for further details.


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28. CREDITORS

The analysis of short term creditors is as follows:

31 Mar 2011 31 Mar 2012£'000 £'000

(6,873) Central Government Bodies (11,698)(2,791) Other Local Authorities (3,477)

(254) NHS Bodies (3)(28) Public Corporations and Trading Funds (39)

(38,851) Bodies External to Central Government (32,503)(5,711) Council Staff Creditors (5,231)(1,002) Housing Rent Prepayments (892)

(431) Liability for Actual BMW Landfill Usage (203)

(55,941) Total Short Term Creditors (54,046) 29. BORROWING REPAYABLE

Analysis of Loans by type:

31 Mar 2011 Range of Interest 31 Mar 2012£'000 Rates - 31 March 2012 £'000

Source of Loan(285,298) Public Works Loan Board 3.370% - 10.875% (442,127)(15,259) Bonds 3.750% - 6.620% (15,260)

(300,557) Total (457,387) Analysis of Loans by maturity: 31 Mar 2011 31 Mar 2012

£'000 £'000

(15,033) (15,174)(2,320) (3,649)

(17,353) (18,823)

(10,000) Maturing in 1 to 2 years (18,000)(59,150) Maturing in 2 to 5 years (41,150)(14,154) Maturing in 5 to 10 years (20,904)

(199,900) Maturing in more than 10 years (358,510)(283,204) (438,564)

(300,557) Total (457,387)

Borrowing repayable within a period in excess of 12 months

Total Borrowing repayable within a period in excess of 12 months

Borrowing repayable on demand or within 12 monthsBorrowing repayable on demand or within 12 monthsAccrued interest on borrowing repayable within a period in excess of 12 monthsTotal Borrowing repayable on demand or within 12 months


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30. PROVISIONS

The provisions are summarised in the table below, with further detail on each one provided as a note following the table:

a) Heating and Utilities Provision This provision has been set aside to cover the costs of potential refunds to sheltered area tenants and leaseholders in respect of over-recovered utility costs. The provision consists of: • Leaseholder utilities and administration overcharge – A £78,500 provision has been

held in accounts since 2005 for potential claims in relation to excessive utilities and management recharges on leasehold stock in prior years. A management recharge methodology review and reconciliation was completed in 2011/12 and £18,500 of provision was released accordingly. The timing of cash flow and resolution is expected in 2012/13;

• Housing Stock Utilities overcharge provision – A £520,000 provision is held in the

accounts for potential claims in relation to excessive utilities recharging on Housing stock tenants. The Service is to assess provision reduction in future years after

Add

ition

al

prov

isio

ns m

ade

in

2011

/12

Am

ount

s us

ed in

20

11/1

2

Unu

sed

amou

nts

reve

rsed

in

2011

/12

Unw

indi

ng o

f D

isco

untin

g 20

11/1

2

Bal

ance

at

31 M

arch

201

2

Shor

t Ter

m

Long

Ter

m

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Housing Revenue Accounta) Heating and Utilities Provision (621) 0 19 22 0 (580) (60) (520)b) Digital TV’s Provision 0 (100) 0 0 0 (100) (100) 0

(621) (100) 19 22 0 (680) (160) (520)General Fundc) Home Bond Scheme Provision (42) 0 0 0 0 (42) 0 (42)d) Legal Provision (10) 0 0 0 0 (10) (10) 0 e) Overpaid Benefit Provision (480) (55) 0 0 0 (535) 0 (535)f) IT & Transport Equipment Provision (125) (23) 13 0 0 (135) (65) (70)g) Secklow Gate Bridge Provision (213) (143) 0 0 0 (356) (356) 0 h) Environment Searches Provision (212) 0 0 0 0 (212) 0 (212)i) Volumetric Provision (20) 0 0 20 0 0 0 0 j) Redundancy & Pension Strain

Provision0 (33) 0 0 0 (33) (33) 0

k) Carbon Reduction Provision 0 (246) 0 0 0 (246) (246) 0 l) The Open University Provision (190) 0 157 33 0 0 0 0 m) HIMO Appeal Provision (18) 0 18 0 0 0 0 0

(1,310) (500) 188 53 0 (1,569) (710) (859)

Total (1,931) (600) 207 75 0 (2,249) (870) (1,379)

Bal

ance

at

31 M

arch

201

1


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commencement of recharging restructure on Northgate SX3 rent system. This is due to be prepared during 2012/13 for potential implementation in 2013/14.

b) Digital TV’s Provision £100,000 provision has been put aside in 2011/12 as a general provision for loss relating to the recharge of Digital TV costs to tenants. The £1pw tenant recharge has been demonstrated not to recoup all of Milton Keynes Council’s costs and the shortfall has been estimated to be in the region of £100,000. Work is currently being carried out to determine a breakeven rate and a decision / outcome is expected to be made within the year. c) Home Bond Scheme Provision In 2005/06 the council introduced a Home Bond pilot scheme, primarily financed through the Homelessness Grant to develop the availability of private sector accommodation. Instead of a rent deposit the Home Bond scheme provides a bond. This is an undertaking to cover damages or loss of rent up to the value of one months rent. In addition, separate rental arrangements are underwritten against wilful damage. At the end of 2010/11 there were a total of 449 participants in the Home Bond scheme; the service has not been able to confirm the equivalent figure for 2011/12 so this has been left unchanged. There are 21 underwritten agreements bearing risk at the end of 2011/12. It is recommended that this provision should be reviewed in the light of better record keeping in 2012/13. d) Legal Provision The council is currently in dispute with Excel Care concerning the funding of the block bed contract of the various Excel Care homes. After seeking legal advice it was deemed prudent to create a provision of £10,000 to cover legal costs based on the likelihood of achieving a negotiated settlement. This provision is expected to be resolved within the next financial year. e) Overpaid Benefit Provision The provision for loss of on-going benefits represents the potential loss on subsidy arising from non-recovery (write off) of on-going benefit debt. Due to the way that the subsidy system works, if the authority recovers eligible overpayments (i.e. also gets the money back from Department for Work and Pensions (DWP)) this can lead to an overall increase in the percentage of subsidy recovered. This debt, referred to as the on-going benefit debt (OGB), can become significant as the amount that can be reclaimed is regimented. The authority has already received the money from DWP if it is an eligible overpayment therefore the threshold rates of 60%; 40% and 0% do not apply - this is all straight 'profit' to the authority.


103

The authority does not record the subsidy transactions in its books; but rather reflects the end result i.e. the overall cost to the authority of providing benefits to claimants in accordance with the regulations laid out by DWP. CIPFA neither recommends nor prohibits recording the subsidy transactions; however the authority regards that it would be prudent to recognise a potential decrease in the subsidy percentage in the accounts if a significant amount of on-going benefit debt was written off. f) IT & Transport Equipment Provision This provision was created in 2001/02 to cover high expiry costs for any IT and transport equipment leased by the council on operating leases. The balance in the provision is made up of regular monthly entries from additional rental charges made to service users. Additional provision is made when new operating leases are entered into where the residual values included in the deal by the lessor are much higher than those expected by the service users. The amount in the provision for each lease on its expiry is then used to help cover potentially high expiry costs due to the high residual value. In addition, the provision also includes an amount allocated for IT equipment which represents money refunded to the council as compensation in 2001/02 following the mishandling of lease tenders by the council’s leasing broker at the time and an administration fee charged to a service who withdrew items from a lease drawdown at a late stage, after tenders had been received. g) Secklow Gate Bridge Provision Following a fire under the Secklow Gate Bridge during 2010, a provision has been created to account for the possibility that the third party insurance company will not pay the full costs incurred for the associated costs of the repair work. This uncertainty stems from the delay in the repairs being undertaken. The insurers have stated that they will cover costs incurred on repair and a "reasonable time period" of other associated costs. The provision has been estimated as all of the actual costs incurred of both scaffolding and traffic management in 2011/12 and for a period of six months of costs in 2010/11. The extent to which the provision will be required depends on the decision of the insurance company. h) Environment Searches Provision Following a legal ruling during 2010/11, the council may need to refund income received for searches undertaken in the last 6 years. The value of the provision has been calculated based on the number of searches undertaken in this period, reduced by a grant of £34,000 from the Department of


104

Communities and Local Government to reimburse the authority for both potential restitutionary claims and loss of fees forgone during 2010/11. The extent to which the provision may be required depends on the number of claims made against the council following the ruling. It is not currently possible to estimate the likely number of claims. i) Volumetric Provision The council had created a provision to meet the cost of a potential volumetric claim payable to Mouchel Business Services following the implementation of the Supplier Relationship Management system. The provision was reviewed during 2011/12 and reversed back to revenue. The claim has now been settled. j) Redundancy & Pension Strain A provision has been created to allow for the pension and redundancy costs of staff who were identified as potential redundancies but whose departure date was not confirmed on the 31st March 2012. k) Carbon Reduction In accordance with CIPFA LAAP Bulletin 91, issued February 2012, the council is required to create a provision to meet its obligations under the Carbon Reduction Commitment Energy Efficiency Scheme within 2011/12 accounts; the first year of such a requirement. This covers all properties including schools and academies within the borough. l) Open University Provisions This provision was created to fund a project at the V10 Brickhill Street as a result of a claim submitted by the Open University. The works were undertaken and completed during 2011/12 costing £157,000. The remaining £33,000 was reversed back to revenue as the provision was no longer required having undertaken the necessary works. m) Housing in Multiple Occupation (HIMO) Appeal Provision This provision was created in anticipation of the Judicial Review Judgement on the council’s challenge to changes to HIMO Planning. This was based upon the potential of having costs awarded against the council using the value that was submitted in court. The appeal was concluded in 2011/12 and costs were awarded against the council in year.


105

31. RESERVES

The following table provides details of the Reserves held by the council as detailed in the Movement in Reserves Statement.

Balance Balance 31 Mar 2011 Notes 31 Mar 2012

£'000 £'000Usable Reserves

(7,014) General Fund Balance (8,796)(9,152) Schools Balances (10,755)(3,566) Housing Revenue Account Balance (5,511)

(19,732) Total Fund Balances (25,062)

(18,095) Total General Fund Earmarked Reserves (26,412)

(4,528) Total HRA Earmarked Reserves (4,568)

(4,728) Capital Receipts Reserve (4,881)(20,233) Capital Grants Unapplied Reserve (32,493)

(67,316) Total Usable Reserves* (93,416)Unusable Reserves

(561,976) Capital Adjustment Account a (375,856)(95,049) Revaluation Reserve b (102,619)

496 Financial Instruments Adjustment Account c 519142,165 Pensions Reserve d 263,933(1,779) Collection Fund Adjustment Account e (2,114)(8,334) Deferred Capital Receipts f (2,496)

910 Accumulated Absences Account g 927

(523,567) Total Unusable Reserves (217,706)

(590,883) Total Authority Reserves (311,122)

* Full details of the movement on the authority’s usable reserves can be found in the Movement in Reserves Statement and Note 7, along with a description of the purpose of each reserve. a) Capital Adjustment Account The Capital Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for the consumption of non-current assets and for financing the acquisition, construction or enhancement of those assets under statutory provisions. The account is debited with the cost of acquisition, construction or enhancement as depreciation, impairment losses and amortisations are charged to the Comprehensive Income and Expenditure Statement (with reconciling postings from the Revaluation Reserve to convert fair value figures to a historical cost basis). The account is credited with the amounts set aside by the authority as finance for the costs of acquisition, construction and enhancement. The account contains accumulated gains and losses on Investment Properties and gains recognised on donated assets that have yet to be consumed by the authority.


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The account also contains revaluation gains accumulated on Property, Plant and Equipment before 1st April 2007, the date that the Revaluation Reserve was created to hold such gains. Note 23 provides details of the source of all the transactions posted to the account, apart from those involving the Revaluation Reserve. The table below shows the movement in year for the Capital Adjustment Account.

2010/11£'000 £'000 £'000

(711,378) Balance at 1 April (561,976)

32,448 Charges for depreciation and impairment of non-current assets 42,948 138,645 Revaluation losses on Property, Plant and Equipment 7,858

768 Amortisation of Intangible Assets 717 10,344 Revenue Expenditure Funded from Capital Under Statute 1,604

19,824 Amounts on non-current assets written off on disposal or sale as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement

8,751

202,029 61,878 (7,064) (3,668)

(516,413) (503,766)

Capital financing applied in the year:(1,660) Use of the Capital Reserve to finance new capital expenditure (6,683)

(4,897)Use of the Major Repairs Reserve to finance new capital expenditure (8,092)

(20,691)Capital grants and contributions credited to the Comprehensive Income and Expenditure Statement that have been applied to capital financing

(10,645)

(4,545) Application of grants to capital financing from the Capital Grants Unapplied Account (4,261)

(10,421) Statutory provision for the financing of capital investment charged against the General Fund and HRA balances (10,944)

(3,349)Capital expenditure charged against the General Fund and HRA balance (1,675)

(45,563) (42,300)

0 Movement in the market value of Investment Properties debited or credited to the Comprehensive Income and Expenditure Statement

(150)

0 Movement in the Donated Assets Account credited to the Comprehensive Income and Expenditure Statement 0

0 HRA Self Financing 170,360 (561,976) Balance at 31 March (375,856)

Reversal of items relating to capital expenditure debited or credited to the Comprehensive Income and Expenditure Statement:

Net written out amount of the cost of non-current assets consumed in the year

Adjusting amounts written out of the Revaluation Reserve

2011/12


107

b) Revaluation Reserve The Revaluation Reserve contains the gains made by the authority arising from increases in the value of its Property, Plant and Equipment and Intangible Assets. The balance is reduced when assets with accumulated gains are:

Re-valued downwards or impaired and the gains are lost; Used in the provision of services and the gains are consumed through

depreciation, or Disposed of and the gains are realised.

The reserve contains only revaluation gains accumulated since 1st April 2007, the date that the reserve was created. Accumulated gains arising before that date are consolidated into the balance on the Capital Adjustment Account.

2010/11

£'000

(97,211) Balance at 1 April (95,049)

(7,854) Upward revaluation of assets (19,827)

2,952 Downward revaluation of assets and impairment losses not charged to the Surplus/Deficit on the Provision of Services

8,589

(4,902) (11,238)

5,310 Accumulated gains on assets sold or scrapped 1,907

7,064 Amount written off to the Capital Adjustment Account 3,668

(95,049) Balance at 31 March (102,619)

1,754 1,761

2011/12£'000

Difference between fair value depreciation and historical cost depreciation

Surplus or deficit on revaluation of non-current assets not posted to the Surplus or Deficit on the Provision of Services

c) Financial Instrument Adjustment Account The Financial Instruments Adjustment Account absorbs the timing differences arising from the different arrangements for accounting for income and expenses relating to certain financial instruments and for bearing losses or benefiting from gains per statutory provisions. The authority uses the account to manage premiums paid and discounts received on the early redemption of loans. Premiums and discounts are posted to the Comprehensive Income and Expenditure Statement when they are incurred, but reversed out of the General Fund Balance to this account in the Movement in Reserves Statement. Over time, the income/expense is posted back to the General Fund Balance in accordance with statutory arrangements for spreading the impact on Council Tax.


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In the council’s case, for premiums this period is the unexpired term that was outstanding on the loans when they were redeemed or the period to the financial year in which the replacement loan is due to be repaid, whichever is the later, and for discounts is the shorter of the unexpired term of the replacement loan or 10 years.

2010/11 2011/12

£'000 £'000

446 Balance at 1 April 496

0Premiums and discounts incurred in the year and charged to the Comprehensive Income and Expenditure Statement 0

50Proportion of premiums and discounts incurred in previous financial years to be charged against the General Fund Balance in accordance with statutory requirements

23

50Amount by which finance costs charged to the Comprehensive Income and Expenditure Statement are different from finance costs chargeable in the year in accordance with statutory requirements

23

496 Balance at 31 March 519 d) Pension Reserve The Pension Reserve absorbs the timing differences arising from the different arrangements for accounting for post employment benefits and for funding benefits in accordance with statutory provisions. The council accounts for post employment benefits in the Comprehensive Income and Expenditure Statement as the benefits are earned by employees accruing years of service, updating the liabilities recognised to reflect inflation, changing assumptions and investment returns on any resources set aside to meet the costs. However, statutory arrangements require benefits earned to be financed as the council makes employer’s contributions to pension funds or eventually pay any pensions for which it is directly responsible. The debit balance on the Pension Reserve therefore shows a substantial shortfall in the benefits earned by past and current employees and the resources the council has set aside to meet them. The statutory arrangements will ensure that funding will have been set aside by the time the benefits come to be paid.

2010/11 2011/12£'000 £'000

263,795 Balance at 1 April 142,165

(87,824) Actuarial gains or losses on pensions assets and liabilities 117,600

(18,042)Reversal of items relating to retirement benefits debited or credited to the Surplus or Deficit on the Provision of Services in the Comprehensive Income and Expenditure Statement

18,887

(15,764) Employer's pension contributions and direct payments to pensioners payable in the year (14,719)

142,165 Balance at 31 March 263,933


109

e) Collection Fund Adjustment Account The Collection Fund Adjustment Account manages the differences arising from the recognition of council tax income in the Comprehensive Income and Expenditure Statement as it falls due from council tax payers compared with the statutory arrangements for paying across amounts to the General Fund from the Collection Fund.

2010/11 2011/12£'000 £'000

(430) Balance at 1 April (1,779)

(1,349)Amount by which council tax income credited to the Comprehensive Income and Expenditure Statement is different from council tax income calculated for the year in accordance with statutory requirements

(335)

(1,779) Balance at 31 March (2,114) f) Deferred Capital Receipts Reserve The Deferred Capital Receipts Reserve holds the gains recognised on the disposal of non-current assets but for which cash settlement has yet to take place. Under statutory arrangements, the council does not treat these gains as usable for financing new capital expenditure until they are backed by cash receipts. When the deferred cash settlement eventually takes place, amounts are transferred to the Capital Receipts Reserve.

2010/11 2011/12£'000 £'000

(81) Balance at 1 April (8,334)

(8,260) Transfer of deferred sale proceeds credited as part of the gain/loss on disposal to the Comprehensive Income and Expenditure Statement (99)

7 Transfer to the Capital Receipts Reserve upon receipt of cash 5,937

(8,334) Balance at 31 March (2,496)


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g) Accumulated Absences Account The Accumulated Absences Account absorbs the differences that would otherwise arise on the General Fund Balance from accruing for compensated absences earned but not taken in the year, e.g. annual leave entitlement carried forward at 31st March. Statutory arrangements require that the impact on the General Fund Balance is neutralised by transfers to or from the account.

2010/11 2011/12£'000 £'000

1,104 Balance at 1 April 910

(1,104)Settlement or cancellation of accrual made at the end of the proceeding year (910)

910 Amounts accrued at the end of the current year 927

(194)

Amount by which officers remuneration charged to the Comprehensive Income and Expenditure Statement on an accruals basis is different from remuneration chargeable in the year in accordance with statutory requirements

17

910 Balance at 31 March 927 32. CASH AND CASH EQUIVALENTS

The table below provides an analysis of the components of cash and cash equivalents.

Balance Balance Movement31 Mar 2011 31 Mar 2012 In Year

£'000 £'000 £'000

Cash held by the Authority 953 639 (314)

Short-term deposits with Financial Institutions 8,640 2,233 (6,407)

Bank Overdraft (18,374) (10,853) 7,521

Total Cash & Cash Equivalents (8,781) (7,981) 800


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33. NET CASH FLOW FROM OPERATING ACTIVITIES

The table below provides an analysis of non cash items and investing and financing activities included in the provision of services as presented in the Cash Flow Statement.

2010/11 2011/12£'000 £'000(102,567) Net Surplus/(Deficit) on the provision of services (171,440)

166,964 Depreciation and Impairment of Non-Current Assets 43,281

(30,497) Capital Grants and Contributions (27,166)

(71) (Increase) / Decrease in Creditors 1,271

17,796 Increase / (Decrease) in Debtors 2,820

(572) Increase / (Decrease) in Inventories and Work in Progress 522

667 (Increase) / Decrease in Provisions 318

(33,806) Pension Assets / Liabilities 4,168

9,714 Carrying Amount of Non-Current Assets Sold 7,425

50 Financial Instruments 0

878 Housing Capital Receipts Pool 458

0 Amortised Premiums 0

4,282 Revenue Expenditure Funded from Capital Under Statute (4,377)

(1,959) Local Government Reorganisation Transferred Debt (1,959)-

(6,337) Other non-cash items charged to the net surplus or deficit on the Provision of Service (1,610)

127,109 25,151

0 0

14,298 13,680

Cash flow from interest received and paid(15,474) Interest Paid (14,848)

(77) Interest element of Finance Leases (77)

1,559 Interest Received 1,698

(13,992) Total Cash Flow from Interest Received and Paid (13,227)24,848 Net Cash flow from Operating Activities (145,836)

Adjustments to net Surplus or deficit on the provision of services for non-cash movements

Total Non-Cash Items in the Provision of Services

Total Investing and Financing activities included in the Provision of Services

Reversal of operating activity items included in the net surplus or deficit on the Provision of Services that are shown separately


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34. AMOUNTS REPORTED FOR RESOURCE ALLOCATION DECISIONS

The analysis of income and expenditure by service on the face of the Comprehensive Income and Expenditure Statement is that specified by the Service Reporting Code of Practice. However, decisions about resource allocation are taken by the council’s Cabinet on the basis of budget reports analysed across Service Groups. These reports are prepared on a different basis from the accounting policies used in the Financial Statements. In particular:

• no charges are made in relation to capital expenditure (whereas depreciation, revaluation and impairment losses in excess of the balance on the Revaluation Reserve and amortisations are charged to services in the Comprehensive Income and Expenditure Statement);

• the cost of retirement benefits is based on cash flows (payment of employer’s

pensions contributions) rather than current service cost of benefits accrued in the year

• expenditure on some support services is budgeted for centrally and not charged to

directorates. The table on the following page shows the income and expenditure of the council principle Service Groups recorded in the budget reports for the year:


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2011/12 Res

ourc

es:

Fina

nce

& H

R

Res

ourc

es:

Publ

ic A

cces

s

Adu

lt So

cial

C

are

& H

ealth

Hou

sing

&

Com

mun

ity

Reg

ulat

ory

Uni

t

Com

mun

ity

Faci

litie

s U

nit

Inte

grat

ed

Supp

ort

Educ

atio

n,

Effe

ctiv

enes

s &

Par

ticip

atio

n

Plan

ning

, Ec

onom

y &

D

evel

opm

ent

Tota

l Car

ried

Forw

ard

to

Bel

ow

£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Government Grants (116,909) (736) (9,827) (653) (32) (469) (1,999) (21,038) (3,594) (155,257)Fees, Charges & Other Service Income (2,228) (1,466) (13,469) (1,170) (3,112) (2,223) (1,193) (5,640) (3,635) (34,136)TOTAL INCOME (119,137) (2,202) (23,296) (1,823) (3,144) (2,692) (3,192) (26,678) (7,229) (189,393)

Employee Costs 6,289 548 19,788 1,302 3,284 3,563 16,001 12,061 3,299 66,135Other Operating Expenses 142,281 5,885 54,908 1,941 1,303 4,013 22,737 21,073 2,094 256,235Support Service Recharges (24,185) (6,760) 3,382 1,185 1,870 2,209 5,223 5,660 970 (10,446)TOTAL EXPENDITURE 124,385 (327) 78,078 4,428 6,457 9,785 43,961 38,794 6,363 311,924Contributions to/(from) Reserves 812 669 295 594 66 (110) 525 (2,185) 3,238 3,904NET EXPENDITURE 6,060 (1,860) 55,077 3,199 3,379 6,983 41,294 9,931 2,372 126,435

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£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Government Grants (155,257) (1,140) 0 0 0 0 0 (161,599) (101,782) (419,778)Fees, Charges & Other Service Income (34,136) (13,628) (2,783) (11) (300) (1,794) (49,720) (5,479) (97,504) (205,355)TOTAL INCOME (189,393) (14,768) (2,783) (11) (300) (1,794) (49,720) (167,078) (199,286) (625,133)

Employee Costs 66,135 2,349 6,666 367 2,551 0 3,265 125,596 0 206,929Other Operating Expenses 256,235 12,353 27,745 34 1,488 24,654 38,798 35,801 9,232 406,340Support Service Recharges (10,446) 10,488 (6,121) 12 490 (2,039) 7,616 0 0 0TOTAL EXPENDITURE 311,924 25,190 28,290 413 4,529 22,615 49,679 161,397 9,232 613,269

Contributions to/(from) Reserves 3,904 626 55 (1) 44 670 224 4,452 108 10,082

NET EXPENDITURE 126,435 11,048 25,562 401 4,273 21,491 183 (1,229) (189,946) (1,782)


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2010/11 Res

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Fina

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£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Government Grants (113,113) (52) (10,153) (580) (34) (422) (2,578) (21,637) (2,263) (150,832)Fees, Charges & Other Service Income (2,220) (1,723) (12,270) (1,077) (3,001) (1,893) (2,893) (20,235) (1,813) (47,125)TOTAL INCOME (115,333) (1,775) (22,423) (1,657) (3,035) (2,315) (5,471) (41,872) (4,076) (197,957)Employee Costs 7,559 584 23,003 1,673 4,195 4,077 19,147 17,979 3,306 81,523Other Operating Expenses 136,600 5,950 53,294 2,186 1,537 5,476 25,460 27,976 1,672 260,151Support Service Recharges (22,130) (6,925) 3,453 833 1,593 2,127 5,020 4,993 1,606 (9,430)TOTAL EXPENDITURE 122,029 (391) 79,750 4,692 7,325 11,680 49,627 50,948 6,584 332,244Contributions to/(from) Reserves (157) 206 241 118 (84) 24 (28) (979) (514) (1,173)NET EXPENDITURE 6,539 (1,960) 57,568 3,153 4,206 9,389 44,128 8,097 1,994 133,114

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£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000Government Grants (150,832) (1,841) (161) 0 (301) 0 0 (194,635) (25,443) (373,213)Fees, Charges & Other Service Income (47,125) (11,683) (19,997) 46 (67) (1,166) (53,251) (6,752) (231,307) (371,302)TOTAL INCOME (197,957) (13,524) (20,158) 46 (368) (1,166) (53,251) (201,387) (256,750) (744,515)

Employee Costs 81,523 2,782 7,937 253 3,104 0 4,161 159,420 0 259,180Other Operating Expenses 260,151 15,956 42,486 75 1,602 23,910 39,040 46,448 49,180 478,848Support Service Recharges (9,430) 6,632 (2,214) (344) 253 (1,742) 6,809 0 36 0TOTAL EXPENDITURE 332,244 25,370 48,209 (16) 4,959 22,168 50,010 205,868 49,216 738,028

Contributions to/(from) Reserves (1,173) 113 (233) 9 7 0 3,630 (436) 4,574 6,491

NET EXPENDITURE 133,114 11,959 27,818 39 4,598 21,002 389 4,045 (202,960) 4


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Reconciliation between Amounts Reported for Resource Allocation Decisions and the Comprehensive Income and Expenditure Statement The table below illustrates how the Amounts Reported for Resource Allocation Decisions (previous disclosure) reconciles to the Cost of Services reported in the Comprehensive Income and Expenditure Statement, by identifying and illustrating amounts not reflected in either the Amounts Reported for Resource Allocation Decisions or the Comprehensive Income and Expenditure Statement.

2010/11 2011/12£'000 £'000

4Net expenditure in the Amount Reported for Resource Allocation Decisions (1,782)

0 Net expenditure on services and support services not included in the Analysis 0

95,783Amounts in the Comprehensive Income and Expenditure Statement not reported to management in the Amount Reported for Resource Allocation Decisions

177,369

197,994 Amounts included in the Analysis not included in the Comprehensive Income and Expenditure Statement 197,759

293,781 Cost of Services in Comprehensive Income and Expenditure Statement 373,346


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Reconciliation to Subjective Analysis This reconciliation shows how the figures in the analysis of Service Group income and expenditure relate to a subjective analysis of the Surplus of Deficit on the Provision of Services included in the Comprehensive Income and Expenditure Statement.

2011/12 Am

ount

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for

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Dec

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£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000

Fees, Charges & Other Service Income (104,960) 0 0 67,596 0 (37,364) (67,596) (104,960)Interest and Investment Income (1,797) 0 0 1,797 0 0 (1,797) (1,797)Income from Council Tax (98,599) 0 0 98,599 0 0 (98,599) (98,599)Government Grants (419,779) 0 0 64,671 0 (355,108) (64,671) (419,779)TOTAL INCOME (625,135) 0 0 232,663 0 (392,472) (232,663) (625,135)Employee Expenses 206,927 0 4,185 (2,739) 208,373 2,739 211,112Other Service Expenses 395,513 0 129,903 (11,252) 514,164 (779) 513,385Support Service Recharges 0 0 0 0 0 0 0 0Depreciation, Amortisation & Impairment 0 0 43,281 0 0 43,281 0 43,281Interest Payments 15,477 0 0 (15,477) 0 0 15,477 15,477Precepts and Levies 5,436 0 0 (5,436) 0 0 5,436 5,436Payments to the Housing Capital Receipts Pool 0 0 0 0 0 0 458 458Gain/Loss on Disposal of Non-current Assets 0 0 0 0 0 0 7,426 7,426

TOTAL EXPENDITURE 623,353 0 177,369 (34,904) 0 765,818 30,757 796,575

Surplus/Deficit on the Provision of Services (1,782) 0 177,369 197,759 0 373,346 (201,906) 171,440


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2010/11 Comparators Am

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Fees, charges & other service income (271,802) 0 0 76,225 0 (195,577) (76,225) (271,802)Interest and Investment Income (1,253) 0 0 1,253 0 0 (1,253) (1,253)Income from council tax (98,248) 0 0 98,248 0 0 (98,248) (98,248)Government Grants (373,212) 0 0 56,421 0 (316,791) (56,421) (373,212)TOTAL INCOME (744,515) 0 0 232,147 0 (512,368) (232,147) (744,515)

Employee Expenses 259,180 0 (34,000) (9,934) 0 215,246 9,934 225,180Other service expenses 464,499 0 (37,181) (3,379) 0 423,939 (433) 423,506Support Service recharges 0 0 0 0 0 0 0 0Depreciation, Amortisation & Impairment 0 0 166,964 0 166,964 0 166,964Interest Payments 15,551 0 0 (15,551) 0 0 15,551 15,551Precepts and Levies 5,289 0 0 (5,289) 0 0 5,289 5,289Payments to the Housing Capital Receipts Pool 0 0 0 0 0 0 878 878Gain/Loss on Disposal of Non-current Assets 0 0 0 0 0 0 9,714 9,714

TOTAL EXPENDITURE 744,519 0 95,783 (34,153) 0 806,149 40,933 847,082

Surplus/Deficit on the Provision of Services 4 0 95,783 197,994 0 293,781 (191,214) 102,567


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35. FINANCIAL INSTRUMENTS

International Financial Reporting Standard IAS 39 Financial Instruments Recognition and Measurement, IAS 32 Financial Instruments Presentation and IFRS 7 Financial Instruments Disclosures require that all local authorities provide information about the impact of financial instruments on their risk profile, how the risks arising from financial instruments might affect their performance and financial condition, and how these risks are being managed. a. Financial Instrument Balances The borrowings, investments, trade debtors and creditors disclosed in the Balance Sheet are made up of the following categories of financial instruments:

31 Mar 2011 31 Mar 2012 31 Mar 2011 31 Mar 2012£'000 £'000 £'000 £'000

Loans and Receivables 5,000 10,000 76,073 91,880

Available-for-sale Financial Assets 0 0 0 0

Unquoted Equity Investment at Cost 0 0 0 0

Financial Assets at Fair Value through Profit or Loss 0 0 0 0

Total Investments 5,000 10,000 76,073 91,880

Loans and Receivables 0 0 21,680 11,086

Financial Assets at Fair Value through Profit or Loss 0 0 0 0

Total Debtors 0 0 21,680 11,086

Financial Liabilities at Amortised Cost (283,204) (438,564) (17,353) (18,823)

Financial Liabilities at Fair Value Through Profit and Loss 0 0 0 0

Total Borrowings (283,204) (438,564) (17,353) (18,823)

PFI and Finance Lease Liabilities (5,465) (4,163) 0 0

Total Other Long Term Liabilities (5,465) (4,163) 0 0

Financial Liabilities at Amortised Cost 0 0 (33,476) (41,352)

Financial Liabilities carried at Contract Amount 0 0 0

Total Creditors 0 0 (33,476) (41,352)

Long Term Current

At the 31st March 2012, The Council had £91,880,000 (£76,073,000 in 2010/11) invested with various financial instruments classified as Current Loans and Receivables, of this amount £2,233,000 (£8,640,000 in 2010/11) has been classified as cash equivalent as per Accounting Policy note 6 leaving £89,647,000 (£67,433,000 in 2010/11) on the Balance sheet as Short Term Investments.


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b. Reclassifications of financial instruments

During the financial year there have been no reclassifications between financial assets measured at fair value and those measured at amortised cost.

c. De-recognition of financial instruments There have been no financial assets transferred in such a way that the assets did not qualify for de-recognition during the financial year.

d. Allowance account for credit losses The council has created an allowance for non-payment of debts. Each class of debt is reviewed and any impairment resulting from issues such as changes in the economic climate or the financial position of the debtor is calculated. This is known as the incurred losses method.

e. Defaults and Breaches In respect of loans payable by the council during the year, there have been no breaches or defaults.

f. Financial Instruments Income, Expenses, Gains and Losses The income, expenses, gains and losses recognised in the Comprehensive Income and Expenditure Statement in relation to financial instruments are made up as follows:

2010/11 2010/11 2011/12 2011/12Financial Liabilities

Measured at Amortised

Cost

Financial Assets: Loans

and Receivables

Financial Liabilities

Measured at Amortised

Cost

Financial Assets: Loans

and Receivables

£'000 £'000 £'000 £'000

(15,595) 0 Interest Expense (15,581) 0

0 0 Losses on De-recognition 0 0

0 0 Impairment Losses 0 0

0 0 Fee Expense 0 0

(15,595) 0Total expense in Surplus or Deficit on the Provision of Services (15,581) 0

0 1,300 Interest Income 0 1,844

0 0 Interest Income Accrued on Impaired Financial assets 0 0

0 0 Gains on Derecognition 0 0

0 0 Fee Income 0 0

0 1,300Total Income in Surplus or Deficit on the Provision of Services 0 1,844

(15,595) 1,300Total Surplus or Deficit on the Provision of Services (15,581) 1,844


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g. Fair Value of Assets and Liabilities Carried at Amortised Cost Financial liabilities and financial assets are represented by loans and receivables and carried in the Balance Sheet at amortised cost. Their fair value can be assessed by calculating the present value of the cash flows that will take place over the remaining term of the instruments, using the following assumptions:

Information supplied by PWLB at 31st March 2012 for PWLB loans and by Sector for other loans and receivables;

Where an instrument will mature in the next 12 months, the carrying amount is assumed to be approximate to fair value;

The fair value of trade and other receivables is taken to be the invoiced or billed amount.

The fair value of the liabilities is greater than the carrying amount because the council’s portfolio of loans is comprised of fixed rate loans where the interest rate payable is higher than the prevailing rate at the Balance Sheet date. This shows a notional future loss (based on economic conditions at 31st March 2012) arising from a commitment to pay interest to lenders above current market rates. The fair value of assets is higher than the carrying amount because the council’s portfolio of investment includes a number of fixed rate investments where the interest rate receivable is higher than the rates available for similar investments at the Balance Sheet date. This shows a notional future gain (based on economic conditions at 31st March 2012) attributable to the commitment to receive interest above current market rates. Short-term debtors and creditors are carried at cost as this is a fair approximation of their value.

Carrying Amount Fair Value

Carrying Amount Fair Value

£000 £000 £000 £000

285,298 286,610 Public Works Loan Board 442,127 446,41415,259 17,674 Market Borrowing 15,260 16,26033,476 33,476 Short Term Trade Creditors 41,352 41,352

334,033 337,760 Financial Liabilities at Amortised Cost 498,739 504,026

81,073 81,135 Investments 101,880 102,41321,680 21,680 Short Term Trade Debtors 11,086 11,086

102,753 102,815 Loans and Receivables 112,966 113,499

31 Mar 2011 31 Mar 2012

h. Nature and Extent of Risks Arising from Financial Instruments The council activities expose it to a variety of financial risks:

• Credit Risk – the possibility that other parties might fail to pay amounts due to the council;


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• Liquidity Risk – the possibility that the council might not have funds available to meet its commitments to make payments;

• Market Risk – the possibility that financial loss might arise for the council as a result of changes in such measures as interest rates and stock market movements.

The council’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the resources available to fund services. Risk management is carried out by a central treasury team, under policies approved by the council in the annual treasury management strategy. The council provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk and the investment of surplus cash. Credit Risk Credit risk arises from deposits with banks and financial institutions, as well as credit exposures to the council’s customers. This risk is minimised through the Treasury Management Strategy, which requires that deposits are not made with financial institutions unless they meet strict assessment criteria, including review of credit ratings from all three major rating agencies - Fitch, Moody’s and Standard & Poors, analysis of market data, and is included on a matrix of recommended counterparties compiled by the council’s treasury advisors. The Treasury Management Strategy sets out the process of setting maximum amounts and durations that deposits may be invested with a financial institution. The priorities of the council’s investment strategy are, strictly in order:

1. security of capital 2. liquidity of cash resources 3. yield return on resources

The council’s treasury management risks are kept under constant review and actively managed on a daily basis. Whilst the continued credit crisis in international markets has raised the overall possibility of default, the council’s strict assessment criteria for investment counterparties and active management minimises such risk. The Corporate Director Resources has the delegated authority through the approved Treasury Management Strategy to further restrict or relax the investment names, limits and durations in order to safeguard the council’s resources. During 2011/12 the council took a number of further steps to minimise credit risk. This has ranged from further restricting deposit sums and durations to, where appropriate, removing institutions from the counterparty list and withdrawing deposits. The investment criteria outlined above ensured that financial assets held by the authority at 31st March 2012 were held with institutions that fall into the categories outlined below:

• UK part-nationalised institutions; up to £35 million maximum per institution, deposited for a period up to one year, periods in excess of one year considered on case-by-case basis for longer term resources;


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• UK-registered institutions eligible for the UK Government’s Credit Guarantee Scheme; between £25-30 million maximum per institution, deposited for a period up to three months;

• Highly credit rated institutions of AAA sovereign countries with very strong market datasets; up to £30m maximum per institution, deposited for a period up to three months.

In addition, the council’s counterparty list also included:

• Debt Management Office (UK government); unlimited. Customers for goods and services are assessed taking into account their financial position, past experience and other factors, with individual credit limits being set in accordance with internal ratings in accordance with perimeters set by the council. The following analysis summarises the council’s potential maximum exposure to credit risk on other financial assets, based on experience of default and un-collectability over the last five financial years, adjusted to reflect current market conditions.

Amount at 31 Mar 2012

Historical Experience of

Default

Historical Experience Adjusted for

Market Conditions at 31 Mar 2012

Estimated Maximum

Exposure to Default and

Uncollectibility£'000 % % £'000

A B C D

101,880 0.00% 0.00% 0

0 0.00% 0.00% 0

3,960 14.80% 14.80% 586

Total 586

Customers:

Deposits with Banks and Financial Institutions

Bonds

The past due amount which has not been impaired can be analysed by age as follows:

2010/11 2011/12£'000 £'000

1,670 Less than three months 534

194 Three to six months 247

139 Six months to one year 72

486 More than one year 523

2,489 1,376


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The past due amount which has been impaired can be analysed as follows:

2010/11 2011/12£'000 £'000

30 Less than three months 1

186 Three to six months 79

154 Six months to one year 147

1,498 More than one year 917

1,868 1,144 The factors considered by the council in taking the decision to impair the debt include:

Any significant financial difficulty for the borrower; Any breach of contract or default; The council having granted a concession based on difficulty for the borrower; The likelihood of the borrower entering bankruptcy; Any observable data indicating a measurable decrease in future estimated cash

flows. The council holds no collateral in respect of the outstanding debt detailed above. Liquidity Risk As the council has ready access to borrowing from the Public Works Loan Board, there is no significant risk that it will be unable to raise finance to meet its commitments under financial instruments. Instead, the risk is that the council may have to raise new loans at a time of unfavourable interest rates. In this instance short term loans will be taken until rates become favourable. The table below sets out the maturity analysis of financial liabilities held by the council.

2010/11 2011/12£'000 £'000

15,000 Less than one year 15,000

10,000 Between one and two years 18,000

59,150 Between two and five years 41,150

214,054 More than five years 379,414

298,204 453,564 Market Risk The council is exposed to risk in terms of its exposure to interest rate movements on its borrowings and investments and has a number of strategies for managing interest rate risk. These are set out in the annual Treasury Management Strategy which is approved by council in February each year.


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The table below sets out the financial impact if interest rates had been 1% higher.

2010/11 2011/12£'000 £'000

0 Increase in interest payable on variable rate borrowings 0

(479) Increase in interest receivable on variable rate investments (697)

(2,815) Increase in government grant receivable for financing costs (2,703)

(3,294) Surplus or Deficit on the Provision of Services (3,400)

(773) Share of overall impact debited to the HRA (810)

Decrease in fair value of fixed rate investment assets6 Impact on Other Comprehensive Income and Expenditure (603)

29,323 51,682Decrease in fair value of fixed rate borrowings liabilities Price Risk The council does not invest in equity shares and therefore is not exposed to losses arising from movements in the prices of shares. Foreign Exchange Risk The council has no financial assets or liabilities denominated in foreign currencies and therefore have no exposure to loss arising from movements in exchange rate.


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36. LEASES

a. Council as Lessee Finance Lease The council has acquired IT items, Vehicles, Plant and Equipment under finance leases. The assets acquired under these leases are carried as Vehicles, Plant and Equipment and Intangibles in the Balance Sheet at the following net amounts:

31 Mar 2011 31 Mar 2012£'000 £'000

2,719 Vehicles, Plant, Furniture and Equipment 1,964

2,786 Intangibles 2,228

5,505 4,192 The council is committed to making minimum payments under these leases comprising settlement of the long-term liability for the interest and finance costs that will be payable by the council in future years while the liability remains outstanding. The minimum lease payments are made up of the following amounts:

31 Mar 2011 31 Mar 2012£'000 £'000

Finance lease liabilities (net present value of minimum lease payments):

1,357 - current 1,264

4,108 - non-current 2,899

322 Finance costs payable in future years 249

5,787 4,412 The minimum lease payments will be payable over the following periods:

31 Mar 2011 31 Mar 2012 31 Mar 2011 31 Mar 2012£'000 £'000 £'000 £'000

Not later than one year 1,433 1,389 1,357 1,264

Later than one year and not later than five years 4,354 3,023 4,108 2,899

Later than five years 0 0 0 0

5,787 4,412 5,465 4,163

Minimum Lease Payments Finance Lease Liabilities


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The minimum lease payments do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2011/12 there were no contingent rents payable by the council (2010/11 £0). The council does not sub-let any of the assets acquired under these finance leases. Operating Lease The council has acquired some of its Vehicles, Plant and Equipment by entering into operating leases, with typical lives of 5 years. It also leases some of its property. The future minimum lease payments due under non-cancellable leases in future years are:

31 Mar 2011 31 Mar 2012£'000 £'000

2,457 Not later than one year 1,962

6,143 Later than one year and not later than five years 5,515

4,747 Later than five years 3,550

13,347 11,027 The council has sub-let one of the property assets acquired under these operating leases. At 31st March 2012 the future minimum sub-lease payments expected to be received under non-cancellable sub-leases were £37,100 (£39,200 31st March 2011). The expenditure charged to the Comprehensive Income and Expenditure Statement during the year in relation to these leases was:

31 Mar 2011 31 Mar 2012£'000 £'000

2,902 Minimum Lease Payments 2,441

0 Contingent Rents 0

0 Sublease Payments Receivable 0

2,902 2,441 b. Council as Lessor Finance Leases The council has not leased out any property on a finance lease. Operating Leases The council leases out property under operating leases for the following purposes:


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for the provision of community services, such as sports facilities, tourism services and community centres;

for economic development purposes to provide suitable affordable accommodation for local businesses.

The future minimum lease payments receivable under non-cancellable leases in future years are:

31 Mar 2011 31 Mar 2012£'000 £'000

1,578 Not later than one year 1,909

4,759 Later than one year and not later than five years 4,873

16,150 Later than five years 18,318

22,487 25,100 The minimum lease payments receivable do not include rents that are contingent on events taking place after the lease was entered into, such as adjustments following rent reviews. In 2011/12 £126,000 contingent rents were receivable by the council (£91,000 in 2010/11). 37. LONG TERM CONTRACTS

Public Private Partnership - Mouchel Business Services On 1st January 2004 the council entered into a 12 year contract with HBS, now trading as Mouchel Business Services at an approved cost of £207,120,000 excluding inflation, work volume changes or any additional work commissioned. The contract, which is a public private partnership arrangement, covers the provision of administration, facilities management, finance, human resources, ICT, revenues and benefits and management of several other services. As at 31st March 2012 there was an undischarged obligation under this contract, calculated pro rata on a 2004 price base, of £64,725,000. Responsive Repairs and Voids In April 2006, the council entered into a contract with MITIE Property Services UK Ltd for responsive repairs to council housing stock. The actual level of payments will depend on the council’s take up of repairs work but has an estimated value of £25,000,000. The contract has been extended for another four years, and is now due to end in March 2016. Council Housing Stock In October 2005, the council entered into a four year contract with Apollo London Ltd to be a strategic partner in major works to council housing stock. In November 2009, the council entered into an additional four year contract with Apollo Group to continue these services. The contract is valued at £16,000,000 and is scheduled to end in November 2013.


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In April 2009, the council entered into a contract with Potton Windows Ltd for replacement windows and doors to council housing stock. The contract is valued at £8,000,000 and is scheduled to end in March 2013. Waste

In March 2008, the council entered into a contract with Serco Limited for the collection and disposal of waste within the borough. The value of the contract with Serco is £11,365,785 and it is now due to end in March 2019. The contract has further extension provision for 4 years. Residual Waste In October 2010, the council entered into a contract with Waste Recycling Group (WRG) for Residual Waste (Including Hazardous Waste). The contract value varies each year, dependent on the amount of waste disposed of, but is currently around £4 million. The contract is due to expire in November 2014, but could be extended for a further 3 years, in line with the commencement of the Residual Waste Treatment Facility. An extension would increase the total awarded contract value to £28,000,000. The terms and conditions of the contract include a clause which states that after completion of the first year of the contract, the council may, at its sole discretion, seek novation of the contract. The contract may also be terminated to align with the proposed Residual Waste Treatment Facility or in the event that the council decides to proceed with a new joint Residual Waste Disposal and Treatment contract with Bedford Borough and Central Bedfordshire Councils. Construction Related Professional Services

In January 2009, the council entered into a three year contract with Cyril Sweett, Hewitt Freeborn and Currie and Browne, which has been extended for a further year for the project management, cost control, construction, design and management consultancy (CDMC). The contract is valued at £6,800,000 and is scheduled to end in January 2013. Parking Management Services

In October 2005, the council entered into a contract with NSL Limited for Parking Enforcement Services. The total value for the contract is £10,500,000. This contract is due to end in February 2013. Provision of Temporary Workers

This contract was awarded to Manpower UK Ltd in February 2011 for a period of 3 years, with a potential one year extension. All requirements for temporary staff are routed via this contract and the contract guarantees no minimum value or volume. The estimated value of this contract is £18,800,000.


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Personal Care Services The council entered into a contract with Extracare Charitable Trust for homecare services for older people who live in Lovat Fields Retirement Village. The aim of this domiciliary care is to enable people to maintain their safe independence at home as an alternative to going into a nursing care home. The contract commenced in May 2007 and is due to end in April 2027. The total value for the contract is £39,467,880. Residential & Nursing Homes The council entered into a contract with Excelcare Holdings in November 2003 to provide residential and nursing care for older people eligible for social care funding. The contract is due to end in January 2033 and the total contract value is £192,610,800. 38. RELATED PARTY TRANSACTIONS

The council is required to disclose material transactions with related parties - bodies or individuals that have the potential to control or influence the council or to be controlled or influenced by the council. Disclosure of these transactions allows an assessment of the extent to which the council might have been constrained in its ability to operate independently or might have secured the ability to limit another party’s ability to bargain freely with the council.

Central Government

The UK Government has significant influence over the general operations of the authority – it is responsible for providing the statutory framework within which the council must operate, provides the majority of its funding in the forms of grants and prescribes the terms of many of the transactions that the council has with other parties (e.g. council tax, housing benefits etc). Grants received from government departments are set out in the Grant Income disclosure at Note 18 to the Financial Statements. Other Public Bodies (subject to common control by central government) The council has three pooled budget arrangements with the Milton Keynes Primary Care Trust. Full details of the transactions for each of the pooled arrangements can be found at Note 15. Members Members of the council have direct control over the council’s financial and operating policies. The total of members’ allowances paid during 2011/12 is shown in Note 12. During 2011/12, works and services to the value of £1.238m were commissioned from organisations in which 21 members had an interest. Of this sum, £283,000 was paid to Milton Keynes College for the provision of education related services, and £217,000 was paid to the Milton Keynes YMCA for the provision of accommodation and support to young people.


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In addition, the council paid grants totalling £221,000 to voluntary and charitable organisations in which 16 members had positions on the governing body. Of this sum, £114,000 was paid to Artworks MK to support the provision of a cultural education programme. In all cases, grants were made with proper consideration of declarations of interest. The relevant members did not take part in any discussion or decision relating to the grants. Income received during 2011/12 totalled £218,000 (£585,000 in 2010/11) from 16 organisations in which 17 members had an interest. Of this sum, £184,000 was received from Waste Recycling Environmental Ltd for contributions to play areas. Related parties have been included in this note irrespective of whether there have been financial transactions with the council. Details of all member disclosures are recorded in the Register of Members Interests and individual disclosures can be viewed online at http://cmis.milton-keynes.gov.uk/CmisWebPublic/Members.aspx.

Officers All staff employed by the council are required to declare any interest or involvement with a third party which could give rise to a related party transaction. In accordance with the Code of Practice 2011/12, the disclosures made by key management personnel have been considered. However, no disclosures have been made which give rise to a related party transaction disclosure requirement. Assisted Organisations During 2011/12, 61 additional organisations who do not have any involvement with Members or key management personnel but who were in receipt of financial assistance by way of grant funding received £2.099m during the year. Of this sum, £489,000 was paid to 33 sport and community facilities providers such as meeting places, community centres and sport groups to assist them in funding the cost of maintaining the centres and paying hire charges to enable community groups to use the facilities. In addition, 4 organisations whose activity supports the council’s housing needs agenda received £241,000. Connections Floating Support in Partnership with Milton Keynes PACT (Parents and Children Together) provides a service to empower individuals and families to be able to maintain their own home and live independently. The council paid £552,000 in 2011/12 to ensure support for 250 vulnerable adults at risk of losing their accommodation. MK Women’s Aid work to prevent and protect women and children from domestic violence. During 2011/12, the council paid £348,000 for 28 refuge places, a floating support service and crisis intervention support.


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Milton Keynes Cenotaph Trust The Milton Keynes Cenotaph Trust (also known as the Milton Keynes Rose Trust) is a registered charity, led by an independent management committee. The committee consists of six individuals – which include one council officer and two council members, although one of these is acting on behalf of the Royal British Legion. The council has not formally nominated any member or officer to stand on this committee and is not named as being entitled to nominate in the Trust Deed. Milton Keynes Council offers support and advice to the Trust as required, and in the form of administrative and meeting facilities, legal and financial advice, arts and heritage advice and provides the charity with a registered address. The Trust does not pay for any of the services provided by the council. During 2011/12, the council paid the Trust a £110,000 contribution towards the cost of building a cenotaph in Central Milton Keynes. The purpose of the Trust is to design and install a commemorative cenotaph within the Central Milton Keynes area. Outstanding Balances The outstanding amounts owed by related parties at the end of 31st March 2012 totalled £33,000 (£177,000 at 31st March 2011). The outstanding amount owed to related parties at the end of 31st March 2012 totalled £113,000 (£572,000 31st at March 2011). This sum includes £83,000 owed to Bletchley Park Trust which includes funding for roof repairs and Heritage Lottery Grant funding for specialist training activities and collections care for public access. Details of all transactions are available for inspection on request and are included in the Comprehensive Income and Expenditure Statement. No other material related party transactions have been disclosed. Organisations Formally Influenced by the Authority The council has appointed directors to the boards of independent organisations therefore potentially allowing the council to exercise voting rights. These appointments are made in response to requests from the organisations concerned because of a common purpose or activity in relation to the council’s own diverse activities, and not to oversee any financial investment made by the council. Those organisations with whom the council has more than 20% representation and therefore the potential to exercise significant influence are detailed below. The financial information has been compiled using 2010/11 audited information. Inter-Action Ltd Milton Keynes Council has 22% representation (two members appointed by the council) on the Board of Directors of Inter-Action Ltd which is a company limited by guarantee and not


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having share capital. At 31st March 2011 the company’s net assets were £60,287 (£90,597 at 31st March 2010) and the deficit for 2010/11 was £30,310 (£18,748 deficit reported for 2009/10). The company provides a city farm facility, a community cultural garden and facilities for other voluntary sector organisations. In 2011/12, the council paid Inter-Action Ltd £33,000 for works and services and a further £76,000 in grant funding.

Madcap Trust Ltd Milton Keynes Council has 29% representation (two members appointed by the council) on the Board of Directors of the Madcap Trust Ltd which is a charitable company limited by guarantee and not having share capital. At 31st March 2011 the company’s net assets were £75,418 (£85,870 at 31st March 2010) and the deficit for 2010/11 was £10,452 (£12,337 for 2009/10). The charity aims to increase awareness and appreciation of the performing arts through active participation. This is achieved by providing premises and resources for the performance and tuition of the arts. In 2011/12, the council paid the Madcap Trust Ltd £9,000 for works and services.

MK Dons Sport and Education Trust

Milton Keynes Council has a 33% representation (three members appointed by the council) on the Board of Directors of MK Dons Education Trust, which is a charitable company, limited by guarantee. The company’s net assets as at 30th June 2011 were £158,160 (£225,006 at 30th June 2010) and the deficit reported as at 30th June 2011 was £66,846 (surplus of £1,954 at 30 June 2010). The aim of the association is to educate children and young people, resident within Milton Keynes and surrounding areas, through the provision of facilities for recreation and other leisure time occupation. In 2011/12, the council paid the MK Dons Sport and Education Trust £200,000 for works and services, including funding for the Ring of Steel artwork at Stadium MK.

Milton Keynes Parks Trust Ltd Milton Keynes Council has 18% representation (three members appointed by the council) on the Board of Directors of Milton Keynes Parks Trust Ltd, which is a company limited by guarantee and not having share capital. At 31st March 2011 the company’s net assets were £74,038,940 (£69,311,078 at 31st March 2010), and the surplus for 2010/11 was £2,728,668 (£2,091,979 reported for 2009/10). The company is responsible for the management and maintenance of the major woodlands and parkways of the city of Milton Keynes for the benefit of the inhabitants and visitors to the area.


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During 2011/12, the council paid the Milton Keynes Parks Trust Ltd £180,000 which includes a £167,000 contribution for the construction of a football pitch, and received income totalling £20,000. The balance owed to the Milton Keynes Parks Trust at 31st March was £15,000.

Milton Keynes Theatre and Gallery Ltd Milton Keynes Council has 20% representation (two members appointed by the council) on the Board of Directors of Milton Keynes Theatre and Gallery Ltd, which is a company limited by guarantee and not having share capital. At 31st March 2011 the company’s net assets were £591,286 (£294,279 at 31st March 2010), and the surplus for 2010/11 was £297,007 (£1,416 deficit reported for 2009/10). The company was set up to take on the leasehold, management and operation of Milton Keynes Theatre and Gallery. The Theatre and Gallery were built by Milton Keynes Council with the assistance of funding from the National Lottery through the Arts Council of England and the Commission for New Towns. During 2011/12, the council paid the Milton Keynes Theatre and Gallery Ltd £7,000 for works and services and a further £178,000 in grant funding. MK Web Ltd Milton Keynes Council has 25% representation (one member appointed by the council) on the Board of Directors of MK Web Ltd. The company has share capital of £100 and is owned by the council (20%) and Iliffe News and Media Ltd (80%). The latest available Statement of Accounts dated 2nd January 2011 report that the company’s net assets were £8,298 (£35,834 at 27th December 2009) and the deficit for 2010/11 was £29,174 (deficit of £45,659 reported at 27th December 2009). The company operates a community website in Milton Keynes to assist local organisations, including the council, to promote their services and Milton Keynes as a business and lifestyle destination. Income to the company from the council comprises less that half of its turnover. Shenley Leisure Centre Trust Ltd Milton Keynes Council has 21% representation (three members appointed by the council) on the Board of Directors of Shenley Leisure Centre Trust Ltd which is a company limited by guarantee and not having share capital. At 31st March 2011 the company’s net assets were reported to be £931,356 (£879,293 for 2009/10) and the surplus for 2010/11 was reported at £52,063 (£2,192 for 2009/10). The principle activity of the company is the provision of leisure, sports and recreation activities at the Shenley Leisure Centre. During 2011/12, the council paid Shenley Leisure Trust Ltd a grant of £228,000 for provision of leisure services.


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United Sustainable Energy Agency Milton Keynes Council has 40% representation (one member and one officer appointed by the council) on the Board of Directors of United Sustainable Energy Agency, which is a company limited by guarantee and not having share capital. At 31st March 2011 the company’s net assets were £458,808 (£463,765 at 31st March 2010), and the deficit for 2010/11 was £4,957 (surplus of £87,682 reported for 2009/10). The principal objective of the company is to educate the public at home and in the workplace towards more efficient and effective use of energy by providing advice and administering practical projects that will lead to a reduction in energy use, reduction of pollution and protection of the environment.

During 2011/12, the council paid the United Sustainable Energy Agency £740,000 for carbon neutrality contributions. The balance owed to the Agency at 31st March was £15,000. Wolverton and Watling Way Pools Leisure Trust Milton Keynes Council has 43% representation (three members appointed by the council) on the Board of Directors of the Wolverton and Watling Way Pools Leisure Centre Trust which is a charitable company limited by guarantee and not having share capital. At 31st March 2011 the company’s net liabilities were £8,439 (£12,197 at 31st March 2010) and the surplus for 2010/11 was £3,758 (deficit of £17,559 for 2009/10). The object of the Charity is the provision of leisure and recreational services in Milton Keynes and the surrounding area. To achieve this, the company operates two swimming pools. During 2011/12, the council paid the Wolverton and Watling Way Pools Leisure Trust £17,000 for works and services and a further £94,000 in grant funding. The council received income of £13,000 from the Trust.

The council has identified a further 43 organisations to which councillors, 31 in total have been appointed on behalf of the council and where the councillors concerned may be involved in decision making (as part of the Board of Directors), but where the percentage voting rights falls below 20%. Transactions between these organisations and the council are included in the Members, Officers and Assisted Organisations paragraphs earlier in this note.


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39. GROUP ACCOUNTS

During 2007/08 Milton Keynes Council formed a company called Connect MK, in partnership with Freedom4 to provide a broadband service to residents and businesses within the borough of Milton Keynes. Connect MK’s board of directors comprises three heads of service and one council member. Connect MK achieved turnover of £145,000 in 2011/12 and expenditure totalled £170,000. The council has taken the view that the activity of the company does not therefore warrant full group accounts disclosures. 40. TRUST FUNDS

The council acts as trustee for the following Trust Funds: The MK Emergencies Trust Fund The Trust was established to make payments to people who have suffered extreme hardship as a result of flooding within the Borough. The value of the fund at 31st March 2012 was £10,970 (£10,965 at 31st March 2011). Expenditure of £Nil was incurred in 2011/12 (£Nil in 2010/11). The Filgrave Clock Tower Charitable Trust The tower is held at nil value in the council’s Asset Register and is a charity without endowment. In 2011/12, expenditure on the Tower totalled £286 (£322 in 2010/11). The Simpson and Fenny Stratford/Bletchley War Memorial Trusts The trusts were passed to the council to ensure that the memorials were maintained and repaired. There are no funds attached to the trusts and Milton Keynes Council meets all expenditure. However, in 2011/12 there were no costs incurred (£Nil in 2010/11). The Norman Hawes Memorial Trust Fund The trust was founded in memory of the late Norman Hawes for the purpose of assisting young people to travel overseas for educational purposes. The value of the fund at 31st March 2012 was £87,191 (£87,883 in 2010/11). In 2011/12 dividends and donations received generated an income of £3,579 (£3,561 in 2010/11) and expenditure totalling £3,550 was paid out in grants (£2,625 in 2010/11). The council acts as administrator for the trust.


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41. CONTINGENT GAINS AND LOSSES

a. The Court of Appeal has ruled that under Section 117 of the Mental Health Act 1983,

local authorities cannot charge for aftercare of people hospitalised for mental health reasons. There is uncertainty over the potential number of claimants yet to come forward and it is therefore not possible to estimate the ultimate cost that may result.

b. The subject of liability under Equal Pay Legislation has been raised with the council

over a period of time by the recognised representative organisations. The council’s move at a very early stage to single status of its workforce addressed a significant number of anomalies at the time.

The council has operated a formal job evaluation process which allocates jobs to grading structures since that time. The council is now moving towards implementing a new job evaluation process which will ensure equality issues do not arise in the future.

Equal pay audit and reviews were carried out and no significant equal pay issues were identified. Whilst there is a belief that there will be no significant pay impact, until the new methodology is in place there is a risk that equal pay issues could be found and each carries with it a liability to the council of the compensation payment of six years to each impacted employee.

More minor issues relating to potential equal pay matters have been addressed and implemented for non-schools employees, a further minor issue has been identified within the schools community and this will be addressed as part of the implementation of the new scheme(s).

Potential equal pay liabilities as a result of the Job Evaluation exercise are currently unknown. The time scale to provide further information will be dependent on the time taken to reach agreement with the Trade Unions on matters relating to pay/back pay and pay protection. The financial effect will be dependent on these decisions and it is anticipated that these decisions will be reached during the course of 2012/13.

c. A number of staff are to TUPE into Milton Keynes Council later in the year, subject to

a commercial agreement. All staff are on company specific terms and conditions of employment and many are likely to be members of a non LGPS pension scheme. The company redundancy policy and associated pension liabilities which would transfer over with staff are more generous than those available to other Council staff. It is too early to estimate the extent of any potential liability at this stage and discussions are ongoing with the companies regarding the comparability of current pension schemes.

d. As a major employer the council is, from time to time in receipt of employment tribunal

claims. A decision is awaited in respect of one ex-employee who has claimed constructive dismissal. Should this claim succeed it is estimated that the potential damages could be up to £35,000. The Employment Tribunal is expected to give judgement by July 2012. There are currently three further claims from ex-employees lodged with the Employment Tribunal where settlement is at present being explored on a commercial basis in advance of the hearings. Should the claims be settled then the total cost of the three cases is unlikely to exceed £40,000.


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e. There is the possibility of legal challenge to the Core Strategy or Development Plan documents. A landowner, developer or other party could challenge the Development Plan documents after public examination, if they consider there are legal grounds to support their interests. There have been some challenges at national level on the Government’s intention to abolish Regional Spatial Strategies. This is uncertain and is beyond the council’s control. Public examination hearings of the core strategy are to be held in July 2012.

f. The council may be required to make a compensation payment to Cygnet Catering –

a school meals provider - of up to £30,000 for loss of income. This is due to four day nurseries that the council will no longer run.

g. Land connected with the Radcliffe School was sold on 18th February 2011.

Guaranteed amounts were payable to the council on sale completion and on 1st July 2013 the council is due to receive a further £1,953,000. In addition, the council is due overage payments if the price of dwellings sold exceeds a threshold figure. This threshold is assessed annually in accordance with the contract on the anniversary of the sale date. As at 18th February 2012 there were no dwellings sold and the next assessment date is February 2013. There is also a mechanism in the contract for dealing with the payment of overage for any remaining dwellings unsold on the 8th anniversary of the sale to close down the topic of overage.

h. The build of the traveller’s site at Calverton generated a cost overrun of approximately

£147,000 and resulted in a dispute between the council and the company responsible for the project management of the development.

Following adjudication on 3rd May 2012, the council was awarded £370,000 to be paid by the company by 17th May 2012. This receipt will be treated as income in 2012/13.

42. RETIREMENT BENEFITS

a. Local Government Pension Scheme

Participation in pension schemes As part of the terms and conditions of employment of its officers, the council makes contributions towards the cost of post employment benefits. Although these benefits will not actually be payable until employees retire, the council has a commitment to make the payments that need to be disclosed at the time that employees earn their future entitlement. The council participates in one pension scheme – the Local Government Pension Scheme – which is administered by Buckinghamshire County Council. This is a funded defined benefit final salary scheme, meaning that the council and employees pay contributions into a fund, calculated at a level intended to balance the pension’s liability with investment assets. Transactions relating to Post-employment Benefits


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The council recognises the cost of retirement benefits in the reported cost of services when they are earned by employees, rather than when the benefits are eventually paid as pensions. However, the charge required to be made against council tax is based on the cash payable in the year, so the real cost of post employment/retirement benefits is reversed out of the General Fund via the Movement in Reserves Statement.

The following transactions have been made in the Comprehensive Income and Expenditure Statement and the General Fund Balance via the Movement in Reserves Statement during the year:

2010/11 2011/12£'000 £'000

Comprehensive Income and Expenditure StatementCost of Services

28,017 Current Service Cost 18,503(56,353) Past Service Costs 0

360 Settlements and curtailments (2,355)Financing and Investment Income and Expenditure

29,995 Interest Cost 24,867(20,061) Expected Return on scheme assets (22,128)

(18,042) 18,887

0 0

(87,824) Actuarial gains and losses 117,600

(105,866) 136,487


18,042Reversal of net charges made to the Surplus or Deficit for the Provision of Services for Post Employment Benefits in accordance with the code

(18,887)

15,764 Employers Contributions Payable to Scheme 14,719

Total Post Employment Benefits Charged to the Comprehensive Income and Expenditure Statement

Total Post Employment Benefits Charged to the Surplus or Deficit on the Provision of Services

Other Post Employment Benefits Charged to the Comprehensive Income and Expenditure Statement

Actual Amount Charged Against the General Fund Balance for Pensions in Year

The cumulative amount of actuarial gains or loss recognised within the Comprehensive Income and Expenditure Statement to the 31st March 2012 is a loss of (£117,600,000) (£87,824,000 gain in 2010/11). Assets and Liabilities in Relation to Post-employment Benefits

Below is a reconciliation of the present value of scheme liabilities and a reconciliation of the fair value of the scheme assets:


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2010/11 2011/12£'000 £'000

Present Value of Liabilities(532,855) 1 April 2011 (454,348)(28,017) Current Service Cost (18,503)(29,995) Interest Cost (24,867)(5,736) Contributions by Scheme Participants (4,865)77,694 Actuarial Gains and Losses (85,398)7,967 Benefits Paid 12,655

56,353 Past Service Costs 0(418) Losses/(Gains) on Curtailments (1,475)

220 Liabilities extinguished on settlements 10,066439 Unfunded Pension Payments 510

(454,348) 31 March 2012 (566,225)

Reconciliation of Fair Value of Assets269,060 1 April 2011 312,18320,061 Expected Rate of Return 22,12810,130 Actuarial Gains and Losses (32,202)15,764 Employer Contributions 14,7195,736 Contributions by Scheme Participants 4,865

(8,406) Benefits Paid (13,165)(162) Receipt of bulk transfer value (6,236)

312,183 31 March 2012 302,292

(142,165) (263,933)Pension Liability Recognised in the Balance Sheet The expected return on assets is determined by considering the expected returns available on the assets underlying the current investment policy. Expected yields on fixed interest investments are based on gross redemption yields as at the Balance Sheet date. Expected returns on equity investments reflect long term real rates of return experienced in the respective markets. The actual return on scheme assets in the year was £10,074,000 (£30,191,000 2010/11). Scheme History

31 March 2012

31 March 2011

31 March 2010

31 March 2009

31 March 2008

£'000 £'000 £'000 £'000 £'000

Present Value of Liabilities (560,122) (448,427) (525,225) (306,810) (322,930)

302,292 312,183 269,060 189,323 219,045

(6,103) (5,921) (7,630) (6,597) (6,784)

Surplus/(Deficit) in the Scheme (263,933) (142,165) (263,795) (124,084) (110,669)

Fair Value of Assets in the Local Government Pension SchemePresent Value of Unfunded Obligation

The liabilities show the underlying commitments that the council has in the long run to pay post employment retirement benefits. The total liability of (£263.933m) has a substantial impact on the net worth of the council as recorded in the Balance Sheet.


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However, statutory arrangements for funding the deficit mean that the financial position of the council remains healthy because the deficit on the local government scheme will be made good by increased contributions over the remaining working life of employees, as assessed by the scheme actuary. The total contributions made to the Local Government Pension Scheme by the council in the year to 31st March 2012 were £14.719m. The estimated contributions payable to the Local Government Pension Scheme for the period 1st April 2012 to 31st March 2013 is £14.054m. Basis for estimating assets and liabilities Liabilities have been assessed on an actuarial basis using the projected unit method, an estimate of the pensions that will be payable in future years dependant on assumptions about mortality rates, salary levels etc. The liabilities have been assessed by Barnet Waddingham Public Sector Consulting, estimates for the council being based on the latest full valuation which took place on 31st March 2010. Principal assumptions used by the actuary

2010/11 2011/12£'000 £'000

Long Term Expected Rate of Return on Assets in the Scheme:7.7% Equity Investments 6.6%4.4% Gilts 3.3%5.5% Bonds 4.6%7.2% Property 6.1%3.0% Cash 3.0%7.7% Alternative Assets 6.6%

Mortality Assumptions:Longevity at 65 for current pensioners

19.8 Men 20.023.9 Women 24.0

Longevity at 65 for future pensioners21.9 Men 22.025.8 Women 25.93.5% Rate of Inflation (RPI) 3.3%2.7% Rate of Inflation (CPI) 2.5%5.0% Rate of Increase in Salaries 4.7%2.7% Rate of Increase in Pensions 2.5%5.5% Rate for Discounting Scheme Liabilities 4.6%50% 50%Take up of option to convert annual pension into retirement lump sum


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Local Government Pension Scheme assets, by proportion of total assets held

£'000 % £'000 %215,406 69.0 Equity Investments 205,559 68.043,706 14.0 Bonds 51,389 17.09,365 3.0 Cash 6,046 2.0

24,975 8.0 Property 27,206 9.018,731 6.0 Alternative Assets 12,092 4.0

312,183 100.0 302,292 100.0

31 Mar 201231 Mar 2011

History of Experience Gains and Losses

The actuarial gains identified as movements on the Pensions Reserve in 2011/12 can be analysed into the following categories, measured as a percentage of assets and liabilities at 31st March 2012:

31 March 2012

31 March 2011

31 March 2010

31 March 2009

31 March 2008

£'000 £'000 £'000 £'000 £'000

(10.7%) 3.2% 19.5% (29.5%) (13.8%)

0.0% 0.0% 0.0% 0.0% 3.9%Experience Gains and Losses on Liabilities

Difference Between the Expected and Actual Return on Assets

43. PENSION SCHEMES ACCOUNTED FOR AS A DEFINED CONTRIBUTION

SCHEMES

Teachers employed by the authority are members of the Teachers’ Pension Scheme, administered by the Department for Education. The Scheme provides teachers with specified benefits upon their retirement, and the authority contributes towards the costs by making contributions based on a percentage of members’ pensionable salaries. The Scheme is technically a defined benefit scheme. However, the Scheme is unfunded and the Department for Education uses a notional fund as the basis for calculating the employers’ contribution rate paid by local authorities. The authority is not able to identify its share of the underlying financial position and performance of the Scheme with sufficient reliability for accounting purposes. For the purpose of this Statement of Accounts, it is therefore accounted for on the same basis as a defined contribution scheme. In 2011/12 the council paid £9,178,000 (£11,371,000 in 2010/11) to Teachers Pensions in respect of teachers’ retirement benefits, equivalent to 14.1% (14.1% in 2010/11) of total pensionable pay. There was no contribution remaining payable at the year end. The council is responsible for the costs of any additional benefits awarded upon early retirement outside of the terms of the teachers’ scheme. These costs are accounted for on a defined benefit basis.


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1. HOUSING REVENUE ACCOUNT INCOME AND EXPENDITURE STATEMENT

This statement shows the economic cost in the year of providing housing services in accordance with International Financial Reporting Standards, rather than the amount to be funded from rents and government grants. The council charges rent to cover expenditure in accordance with regulations; this may be different from the accounting cost. The increase or decrease in the year, on the basis of which rent is raised, is shown in the Movement on the Housing Revenue Account Statement.

2010/11 2011/12£'000 £'000

Expenditure10,891 Repairs and Maintenance 11,2546,429 Supervision and Management 7,4023,083 Special Services 2,692

268 Rent, Rates, Taxes and Other Charges 38613,528 Negative Housing Revenue Account Subsidy Payable 12,494

Depreciation of Non-Current Assets7,897 Dwellings 6,421

686 All Other HRA Assets 723Impairment of Non-Current Assets

134,488 Dwellings 17,186390 All Other HRA Assets 779

5 Debt Management Costs 6325 Amortisation of Intangible Fixed Assets 22

759 Revenue Expenditure Funded by Capital Under Statute 143786 Contribution to Reserves for Bad and Doubtful Debts 641

1,535 1,0800 170,360


Income(46,018) Dwelling Rents (48,129)(1,724) Non-Dwelling Rents (1,724)

Charges for Services and Facilities(1,108) Tenants (812)(1,682) Leaseholders (646)

(141) Contribution towards expenditure (155)0 Housing Revenue Account Subsidy Receivable 0

(50,673) Total Income (51,466)

130,097 180,180

174 HRA Share of Corporate and Democratic Core 246

130,271 Net Cost of Housing Revenue Account Services 180,426(232) (Gain) / Loss on Sale of HRA Non-Current Assets 111

4,027 Interest Payable and Similar Charges 3,912(89) HRA Interest and Investment Income (110)304 Pension Interest Cost and Expected Return on Pension Assets 84

0 Capital Grants and Contributions Receivable 0

134,281 Surplus / Deficit for the Year on HRA Services 184,423

Rent Rebate Subsidy Limitation Transfer to the General Fund

Net Cost of HRA Services as included in the whole authority Comprehensive Income and Expenditure Statement

HRA Self Financing Debt Settlement


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2. MOVEMENT ON THE HOUSING REVENUE ACCOUNT STATEMENT

This statement illustrates how the Housing Revenue Account Income and Expenditure Statement surplus or deficit for the year reconciles to the movement on the Housing Revenue Account balance for the year.

2010/11 2011/12£'000 £'000

(6,058) Housing Revenue Account Balance as at 1 April 2011 (3,566)

134,281 (Surplus) / Deficit on HRA Income and Expenditure Statement 184,423

(134,222) Adjustments between Accounting Basis and Funding Basis Under Regulations

(186,408)

59Net (Increase) / Decrease before Transfers to/from Earmarked Reserves

(1,985)

2,433 Transfer to / (from) Reserves 40

2,492 Decrease in year on Housing Revenue Account (1,945)

(3,566) Housing Revenue Account Balance as at 31 March 2012 (5,511)


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3. ANALYSIS OF THE ADJUSTMENT BETWEEN ACCOUNTING BASIS AND FUNDING BASIS UNDER REGULATIONS

This note details the adjustments that are made the Housing Revenue Account in the year according with proper accounting practice to the resources that are specified by statutory provisions as being available to the authority to meet capital and revenue expenditure.

2010/11 2011/12£'000 £'000

(143,486)Difference between any other items of income and expenditure determined in accordance with the Code and determined in accordance with statutory HRA requirements

(25,131)

(22) Revenue Expenditure Funded from Capital Under Statute 7

0 Capital Grants & Contributions credited to the Housing Revenue Income & Expenditure Account 0

232 Net Gain or Loss on Sale of Non-Current Assets (111)

(43)Amount by which finance costs calculated in accordance with the Code are different from the amount of finance costs calculated in accordance with statutory requirements

(16)

1,036 Amount by which pension costs calculated in accordance with the Code are different from the contributions due under pension scheme regulations (128)

3,132 Capital Expenditure funded from the Housing Revenue Account 1,176

32 Accumulated Absence Account (33)

4,897 Transfer to/(from) the Major Repairs Reserve 8,092

0 Prudential Borrowing Principal Repayment 96

0 HRA Self Financing Debt Settlement (170,360)

(134,222)Adjustments between accounting basis & funding basis under regulations (186,408)

4. TRANSFERS TO/FROM EARMARKED RESERVES

The following Reserves were held at 31st March 2012.

Bal

ance

at

31

Mar

ch 2

010

Tran

sfer

s O

ut

2010

/11

Tran

sfer

s In

20

10/1

1

Bal

ance

at

31

Mar

ch 2

011

Tran

sfer

s O

ut

2011

/12

Tran

sfer

s In

20

11/1

2

Bal

ance

at

31

Mar

ch 2

012

£'000 £'000 £'000 £'000 £'000 £'000 £'000

Allow for Non-Payment of Debt Reserve (1,147) 400 0 (747) 186 0 (561)Other Earmarked Reserves (292) 192 0 (100) (410) (510)Capital Reserve - HRA (656) 0 (3,025) (3,681) 184 0 (3,497)

Total HRA Earmarked Reserves (2,095) 592 (3,025) (4,528) 370 (410) (4,568)


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5. HOUSING STOCK

At 1st April 2011 the HRA housing stock was 12,479. During the 2011/12 financial year 23 properties were sold to tenants (includes part-sales of shared ownership dwellings), 3 dwellings were disposed of through open market sales and 6 HMO units were transferred to a 2 dwelling standard tenancy with a net transfer out of the HRA stock of 4 units. Therefore as at 31st March 2012 the Council was responsible for managing a housing stock of 12,449 dwellings of which 1,001 is the council’s portion of shared ownership dwellings and 26 are dwellings in multiple-occupation. The analysis of the remaining 11,422 dwellings is as follows:

Houses Flats Total Houses No. ofBuilt Houses

1 Bedroom 1,451 2,368 3,819 Pre - 1919 492 Bedrooms 1,800 853 2,653 1919 - 1944 3493 or more Bedrooms 4,770 180 4,950 1945 - 1964 1,507

Post - 1964 6,116Total 8,021 3,401 11,422 8,021 6. ASSET VALUES

The Balance Sheet values of the assets held within the Housing Revenue Account are as follows:

31 March 2011 1 April 2011 31 March 2012£'000 £'000 £'000

Operational AssetsCouncil Dwellings 426,610 426,610 412,429Other Land & Buildings 18,889 18,932 18,213Equipment 186 186 78

Non Operational AssetsSurplus Assets 3,227 3,227 982Assets Held for Sale 194 194 139Investment Properties 43 43 43

449,149 449,192 431,884 The difference between valuations at 31st March 2011 and 1st April 2011 is due to the revaluation of assets on 1st April. The decrease of £17,308,000 between 1st April 2011 and 31st March 2012 is due to further revaluations in the year along with disposals, depreciation and impairment losses. As at 1st April 2011, the vacant possession value of the council’s dwellings is estimated at £1,360,354,000, compared with the Balance Sheet value of £426,610,000 shown above.


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This variance reflects the economic cost to the Government of providing council housing at less than open market rents. 7. MAJOR REPAIRS RESERVE

The council is required by regulation to establish and maintain a Major Repairs Reserve. The main credit to the account comprises the total depreciation charge for all Housing Revenue Account assets. Capital spending on Housing Revenue Account assets is then funded from the reserve without being charged to the Housing Revenue Account.

2010/11 2011/12£'000 £'000

0 Opening Balance at 1 April 2011 0

(8,583) (8,092)

686 0

7,897 8,092

0 0

0 0

0 Balance Carried Forward at 31 March 2012 0

Debits in respect of the meeting of any liability in year in respect of credit arrangements' other than any liability which in accordance with proper practices must be charged to a revenue account where the meeting of the liability was met by payments out of the reserve

Amounts transferred to the Major Repairs Reserve from the HRA during the year

Amounts transferred from the Major Repairs Reserve to the HRA during the yearDebits to the Major Repairs Reserve during the financial year in respect of capital expenditure on land, houses, and other properties within the HRA

Debits in respect of any repayment made in year of the principal of any amounts borrowed where the repayment was met by the payment out of the Major Repairs Reserve

Where depreciation charges are less than the Major Repairs Allowance (MRA) an amount equal to the difference is transferred to the Major Repairs Reserve. .


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8. CAPITAL EXPENDITURE

Total capital spending within housing and other Housing Revenue Account resources and its funding in 2011/12 is shown in the table below.

2010/11 2011/12£'000 £'000

Capital Spending12,229 - Dwellings 9,766

42 - Other HRA Assets 24759 - Revenue Expenditure Funded from Capital Under Statute 143

13,030 9,933

Funded By242 - Usable Capital Receipts 516972 - Supported Borrowing 0

3,000 - Unsupported Borrowing 04,897 - Major Repairs Allowance 8,092

0 - Government Grant 050 - Third Party Contributions 0

3,869 - Revenue Contributions 1,325

13,030 9,933 9. CAPITAL RECEIPTS

The following capital receipts were received during 2011/12:

2010/11 2011/12£'000 £'000

Sales of Dwellings*:962 Council Houses 572 154 Shared Ownership 12 22 Recovered Discount 16 7 Mortgage Receipts 24

30 Other Sales (14)14 Non RTB Sales 607 42 Capital Improvement receipts 11

1,231 HRA Receipts in Year 1,228 (878) Less: Statutory Pooling (458)

353 770 Total HRA Useable Receipts in year * Sales of dwellings are shown net of administrative costs and clawback.


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10. DEPRECIATION

The total charge for depreciation within the Housing Revenue Account for the year is made up as follows:

2010/11 2011/12£'000 £'000

Operational Assets7,897 Dwellings 6,421

511 Other Land and Buildings 503136 Equipment 128

Non Operational Assets39 Surplus Properties 92

8,583 Gross Balance Sheet Value 7,144 The charge for depreciation on dwellings from 1st April 2011 has been calculated on an actual life basis. Other assets are depreciated over their useful life with property being based on 60 years from completion date.


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11. IMPAIRMENT

The total charge for impairment within the Housing Revenue Account for the year is made up as follows:

Total Impairment

Impairment Loss

Charged to HRA

Reversal of Impairment

Loss charged to

HRARevaluati-

on

Reversal of

Revaluati-on Loss

charged to HRA

Total Impairment

2010/11 2011/12 2011/12 2011/12 2011/12 2011/12£'000 £'000 £'000 £'000 £'000 £'000

Operational Assets134,488 Dwellings 17,718 (8,703) 8,171 0 17,186

390 Other Land & Buildings 786 0 17 0 803

134,878 18,504 (8,703) 8,188 0 17,989

0 Non-Operational Assets 0 0 (24) 0 (24)

0 0 0 (24) 0 (24)

134,878 Total Impairment 18,504 (8,703) 8,164 0 17,965

Balance Sheet Value -Operational Assets

Balance Sheet Value - Non-Operational Assets

The impairment charge on Council Dwellings is recognising the works identified for the HRA 2012/13 Capital Programme. 12. REVENUE EXPENDITURE FUNDED FROM CAPITAL UNDER STATUTE AND

INTANGIBLE NON-CURRENT ASSETS

Expenditure incurred during the year that may be capitalised under statutory provisions but does not result in the creation of a fixed asset has been charged as expenditure to the Housing Revenue Account in the year. Where the council has determined to meet the cost of this expenditure from existing capital resources or by borrowing, a transfer to the Capital Adjustment Account then reverses out the amounts charged in the Statement of Movement on the Housing Revenue Statement so there is no impact on the level of Council Tax. In 2011/12, expenditure of this nature totalled £143,000. Intangible Fixed Assets comprise of purchased software licences and custom built software prepared for use for a period of a least one year and amortised over their useful economic lives. In 2011/12, intangible fixed assets of £22,000 were written down to the Housing Revenue Account.


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13. PENSION RESERVE

The transfer to the Pensions Reserve in respect of the Housing Revenue Account is (£128,000). Details of the background to, and reasons for this adjustment, may be found in note 9 to the Statement of Accounting Policies, and note 42 to the Financial Statements. 14. GOVERNMENT SUBSIDY

Housing Revenue Account negative subsidy payable to the government for the financial year, in accordance with the elements set out in the Government’s Determination of Housing Revenue Account Subsidy for the year, was as follows:

2010/11 2011/12£'000 £'000

(20,193) Management and Maintenance (20,845)(4,301) Charges for Capital (4,279)

0 Rental Constraint Allowance 03 Interest on Receipts 2

42,916 Guideline Rent Income 45,71718,425 HRA Negative Subsidy Entitlement for year 20,595

(7,897) Major Repairs Allowance (8,092)

3,000 0

(4,897) Total MRA Allowance (8,092)

13,528 Total HRA Negative Subsidy Payable for 2011/12 12,503

0 Adjustment in respect of 2010/11 (9)

13,528 Total HRA Negative Subsidy Payable in Year 12,494

Major Repairs Allowance 2010/11 (share brought forward into 2009/10)

The total negative subsidy charged within the HRA of £20,595,000 is partially offset by the Government’s Major Repairs Allowance of £8,092,000, used in the funding of capital expenditure.


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15. RENTS ARREARS

The total rent income for the year, after allowance is made for voids, is known as Gross Rent Income. The loss of income as a result of voids was £1,002,000 (£888,000 in 2010/11). At 31st March 2012, 0.84% of properties available to let were vacant (1.31% at 31st March 2011). Rents are expressed in terms of a 50-week year and were increased from 4th April 2011 by an average of 5.1%. The average weekly rent at the end of 2011/12 was £77.70 (£74.15 in 2010/11). The Housing Revenue Account shows rent income and other miscellaneous charges (for example service charges). Arrears of all charges at 31st March 2012 amounted to £4,962,000 (£3,925,000 at 31st March 2011). During the year ending 31st March 2012 arrears of £364,000 were written off as irrecoverable, which includes rent debt written off amounting to £252,000. The council has made a total provision against all housing-related debts of £1,546,000. This figure includes a provision against rent arrears, in the sum of £1,099,000.

16. SUBSIDY LIMITATION TRANSFER TO THE GENERAL FUND

Rent rebates are available under the Housing Benefit scheme for those on low incomes. 64.30% of the Council’s tenants receive some help with the cost of their rent. From 1st April 2004, the responsibility for carrying the cost of Housing Benefit passed to the General Fund in accordance with legislative changes. The Housing Revenue Account now only bears the cost of rent rebate subsidy limitation, which is the cost of rent rebates payable on rents above the Government’s Limit rent level. In 2011/12 this cost was £1,080,000.


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17. COLLECTION FUND

The Collection Fund is an agent’s statement that reflects the statutory obligation for billing authorities to maintain a separate Collection Fund. The statement shows the transactions of the billing authority in relation to the collection from tax payers and distribution to local authorities and the government of council tax and non-domestic rates.

2010/11 2011/12£'000 £'000

(99,044) Council Tax (100,513)Transfers from the General Fund

(16,780) Council Tax Benefits (16,742)2 Transitional Relief (2)0 Discount for prompt payment 0

(16,778) (16,744)

(135,667) Income from Business Ratepayers (141,009)

0 Income collectable in respect of Business Rates Supplements 0

0 Contributions towards previous years Collection Fund deficit 0

0 Contribution - adjustment of previous years' community charges 0 (251,489) (258,266)

Precepts:12,615 Thames Valley Police Authority 12,787 4,834 Bucks & Milton Keynes Fire Authority 4,900

96,116 Milton Keynes Council 97,504 113,565 115,191

Business Rates:135,150 NNDR Payment to National Pool 140,601

370 Cost of Collecting Business Rates 372 147 Interest on NNDR Payments 35

135,667 141,008

Business Rates Supplement:

0 Payment to Levying authority's Business Rate Supplement Revenue Account 0

0 Administrative costs 0 0 0

(134) Impairment of debts/appeals 708

800 Contributions towards previous years Collection Fund surplus 960

0 Contribution - adjustment of previous years' community charges

249,898 257,867

(1,591) Net (Surplus)/Deficit for the year (399)(508) Opening Fund Balance 1st April 2011 (2,099)

(1,591) Movement on Fund Balance (399)(2,099) Closing Fund balance 1st April 2012 (2,498)

Amounts required by statute to be credited to the Collection Fund

Amounts required by statute to be debited to the Collection Fund


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18. RATEABLE VALUE

The total rateable value of business property at 31st March 2012 was £350,297,689 (£346,057,684 2010/11) and the rate multiplier applied in 2011/12 was £0.433 (£0.414 2010/11) with a reduced multiplier of £0.426 for those businesses receiving Small Business Relief (£0.407 in 2010/11).

19. TAX BASE

The Council Tax base for 2011/12, i.e. the number of chargeable dwellings in each band (adjusted for dwellings where discounts apply) converted to an equivalent number of Band D dwellings, was calculated as follows:

Estimated No. of Ratio to Band DTaxable Properties Band D Equivalent

after discounts/exemptions5/9 10.606/9 8,560.637/9 19,249.828/9 21,595.699/9 11,303.9011/9 11,454.8813/9 6,992.5215/9 4,247.0718/9 200.40

83,615.51

Anticipated changes during the year 220.00

Provision for non-collection (1.15%) (964.11)

Reductions for Discounts

Council Tax Base 82,871.40

A-ABC

H

DEFG

20. COLLECTION FUND BALANCE APPORTIONMENT

The Collection Fund is a statutory Fund in which the council records transactions for Council Tax, Business Rates and residual Community Charges. The balance on the Fund is available for financing the expenditure of the council and the Police and Fire Authorities. In 2011/12 the Fund is in surplus and is attributable to:

2010/11 2011/12£'000 £'000

(1,779) Milton Keynes Council (2,114)(232) Thames Valley Police Authority (278)(88) Buckinghamshire and Milton Keynes Fire Authority (106)

(2,099) (2,498)


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A Collection Fund surplus of (£1,300,000) had been estimated when the 2012/13 Council Tax was set. The final outturn as above was (£2,498,000) surplus, leaving the balance of (£1,198,000) to be a contribution from the Collection Fund in 2012/13. 21. WRITE OFFS

Council Tax debt of £846,938 was written off in 2011/12; (£526,763 in 2010/11).

22. PRECEPTS AND DEMANDS ON THE COLLECTION FUND

2010/11Share of 31 Mar 2012 2011/12

Total Surplus Total£'000 £'000 £'000 £'000

94,339 Milton Keynes Council 97,504 2,114 99,618

12,382 Thames Valley Police Authority 12,787 278 13,064

4,745Buckinghamshire and Milton Keynes Fire Authority 4,900 106 5,006

111,466 Total 115,191 2,498 117,688

Precept / Demand

Glossary

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Accruals Sums included in the final accounts of the council to cover income or expenditure attributable to the accounting period for which payment has not been received/made in the financial year. Local authorities accrue for both revenue and capital expenditure. Actuary An independent and appropriately qualified adviser who carries out statutorily required pension fund valuations. Amortisation The reduction of the value of an asset by prorating its cost over a period of years. Capital Charges A charge for the use of fixed assets in the provision of services. The charge comprises depreciation plus notional interest. Capital Expenditure Spending that produces or enhances an asset, like land, buildings, vehicles, plant and machinery. Definitions are set out in Section 40 of the Local Government and Housing Act 1989. Any expenditure that does not fall within the definition must be charged to a revenue account. Capital Receipts The proceeds from the sale of fixed assets such as land and buildings. Capital receipts can be used to repay any outstanding debt on fixed assets or, to finance new capital expenditure, within rules set down by government. Capital receipts cannot, however, be used to finance revenue expenditure. Chartered Institute of Public Finance and Accountancy (CIPFA) The professional accountancy body concerned with local authorities and the public sector. Collection Fund The Collection Fund is a statutory fund set up under the provisions of the Local Government Finance Act 1988. It includes the transactions of the charging Authority in relation to Non-Domestic Rates and Council Tax and illustrates the way in which the fund balance is distributed to preceptors and the General Fund. Contingent Liabilities/Gains Potential losses/gains for which a future event will establish whether a liability/gain exists and for which it is inappropriate to set up a provision in the accounts. Deferred Grants Amounts received or receivable that have been used to finance capital expenditure. Under the capital accounting arrangements these amounts will be released to offset depreciation in respect of the fixed assets to which they relate. Depreciation The measure of the wearing out, consumption or other reduction in the useful life of a fixed asset.

Glossary

156

Earmarked Reserves These are reserves set aside for a specific purpose or a particular service, or type of expenditure. Finance Leases Arrangement whereby the lessee is treated as owner of the leased asset and is required to include such assets within fixed assets on the balance sheet. Financial Instruments A Financial Instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another. The term ‘financial instrument’ covers both financial assets and financial liabilities and includes both the most straightforward financial assets and liabilities such as trade receivables and trade payables and the most complex ones such as derivatives and embedded derivatives. International Financial Reporting Standard (IFRS) A statement of accounting practice issued by the Accounting Standards Board. Fixed Assets Non-current asset that yields benefits to the council and the services it provides for a period of more than one year. General Fund (GF) This is the main revenue account of the council. Day to day transactions are conducted through this account, with the exception of those relating to the Housing Revenue Account, Collection Fund or any other trust funds held by the council. Housing Revenue Account The account of revenue expenditure and income relating to the council’s own housing stock. Infrastructure Assets Expenditure on works of construction or improvement but which have no tangible value, such as construction of, or improvement to highways. Intangible Assets Expenditure of a capital nature where no tangible asset is created such as housing renovation grants or computer software. Investments Deposits for less than one year with approved institutions. Long Term Debtors Amounts due to the council more than one year after the balance sheet date. Major Repairs Allowance The estimated average annual cost of maintaining the condition of the council’s housing stock over a 30 year period based on the councils mix of dwelling types

Glossary

157

Minimum Revenue Provision The minimum amount that may be set aside for the repayment of debt. The statutory figure is usually shown in a council’s accounts by means of an adjustment to depreciation. National Non-Domestic Rate (NNDR) Under the revised arrangements for uniform business rates, that came into effect on 1st April 1990, the council collects Non-Domestic Rates for its area based on local rateable values, multiplied by a national uniform rate. The total amount, less certain reliefs and deductions, is paid to a central pool managed by the government, that in turn, pays back to Authorities their share of the pool based on a standard amount per head of the local adult population. Non-Operational Assets Fixed assets held by the council but not directly used or consumed in the delivery of its services. This would include surplus properties awaiting disposal. Operational Assets Fixed assets held by the council and used or consumed in the delivery of its services. Operational Leases An arrangement whereby the risks and rewards of ownership of the leased asset remain with the leasing company. Pension Fund An employees’ pension fund maintained by an authority, or a group of authorities, in order primarily to make pension payments on retirement of participants. It is financed from contributions from the employing authority, the employee and investment income. Precepting Authorities Those authorities that are not billing authorities (i.e. do not collect Council Tax) precept upon the billing authority, who then collect on their behalf - Thames Valley Police Authority, Buckinghamshire & Milton Keynes Fire Authority and the Parishes that precept upon Milton Keynes Council. Provisions Sums set aside to meet future expenditure where a specific liability is known to exist but that cannot be measured accurately. Public Works Loan Board The Public Works Loan Board (PWLB) was established in 1793 to provide loans to public bodies from the National Loans Fund. It today provides loans to local authorities of all types in Great Britain, primarily for capital projects, but also as a lender of last resort.

STATEMENT OF ACCOUNTS - Milton Keynes

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